Sure about that bit? This may be the perception – that holding your assets in 'the crypto system' avoids tax issues – but the taxman will disagree.
Swapping $BTC for $USDC or whatever your tether of choice is is a 'taxable event'. You've sold one security in exchange for another. It doesn't matter that they're both crypto.
Now, it might be harder for the taxman to detect this event, which is a different thing.
https://www.ato.gov.au/General/Other-languages/In-detail/Inf...
But be careful! Actually read what your local tax office puts out. Assume nothing: it can be very easy to get yourself in to trouble.
For example:
- You buy BTC @ $1
- You exchange BTC @ $11 for $RANDOM
- You just made $10 :-) and you owe the taxman ~$3 (if you're in Australia)
- $RANDOM falls to ~$0
- So you didn't actually make a material profit
- But you still owe the taxman $3! (though you might be able to claim some sort of offset on your material loss of $RANDOM; IANAA)
- Now multiply all amounts by 10,000 and be sad
It's analogous to selling any asset. You buy gold, you sell gold at a profit and buy silver. You owe tax on the sale of the gold; you assume you'll pay this from the value you now hold in silver. The price of silver plummets. You still owe the tax on the sale of the gold.
From what I understand, you have to actually realize your losses/gains if you want to claim tax on them. So if $RANDOM drops to ~$0 then you can't use it for capital losses until you trade it to another crypto (or cash). You could probably just trade $RANDOM to something else and then back to realize the losses.
As another Australian you should really speak to an accountant if you ain't going to claim that massive loss because this is either comically wrong or intentionally misleading advice.
It's just like any other capital gains event and very simple to grok.
In my country it is not taxable, only exchange to fiat currency is. (and this is explicitly mentioned).
If you wait you loose tax returns for the amount you invested in crypto (with each year you have it halved). Basically this is the same as in case of stock market. You don't pay taxes until you sell stock. And here stock is whole crypto market.
Example:
Sweden taxes your gains when you transact a cryptocurrency holding, also when you exchange from one cryptocurrency to another. [1]
Same for Denmark [2].
Check your relevant tax legislation for your local rules.
[1] https://skatteverket.se/privat/skatter/vardepapper/andratill...
There are many true horror stories of amateur traders going from in the green to losing more than they own. I don't know any place where what you describe is legal.
If this is your strategy (as in method to cheat with taxes) now is probably a good time to calculate how much you owe and put that aside into something less volatile, not to accidentally ruin your life.
I wonder how many other jokers are accidentally conducting life-ruining levels of tax fraud.
I might be wrong, but I believe the IRS views every transaction as a taxable event. Crypto -> crypto included.
