We've been asked a lot of questions about the tax implications of using Finder Earn, and what members need to be aware of when it comes to comes to reporting their earnings at tax time.
We've spoken to our partners at Crowe and they've provided us with the following FAQ on the tax treatment of Finder Earn.
- The fees you earn from Finder Earn should be reported as income for tax purposes (at a value of 1 TAUD to 1 AUD) during the financial year that they are received, even if they are not withdrawn from Finder Earn;
- You should not derive a capital gain or incur a capital loss as Finder Wallet exchanges 1 TAUD for 1 AUD.
This is a complex and novel tax area. The following FAQ is provided as general information only and we recommend that you seek independent tax advice.
Frequently asked questions
The following summary is only applicable for Australian resident taxpayers.
How is the fee paid to Finder Earn members taxed?
The Finder Earn product allows members to purchase cryptocurrency (being the TAUD stablecoin) and then lend that cryptocurrency to Finder Wallet Pty Ltd ("Finder"). In exchange, Finder pays its Finder Earn members a fee for the cryptocurrency it borrows from them. To effect this transaction legally, the member transfers the beneficiary rights in the cryptocurrency to Finder and as consideration the member has a contractual right for the cryptocurrency to be returned to them in the future.
Regardless of whether the cryptocurrency is held by the Finder Earn member on revenue or capital account, the fee received from Finder should be recognised as ordinary income, rather than as a capital gain.
As the fee is paid in cryptocurrency, which is automatically lent to Finder, the taxable amount is equal to the money value of the cryptocurrency received.
Is there a capital gains tax event when Finder Earn members purchase cryptocurrency or withdraw their cryptocurrency from Finder Earn?
For Finder Earn members holding cryptocurrency on capital account, the capital gains tax ("CGT") rules should be applicable in determining the tax implications of acquiring and disposing of cryptocurrency. Broadly, the capital gain or (loss) will be equal to the difference between the capital proceeds received upon disposal and the tax cost base of the cryptocurrency.
There will be a capital gains tax event at the time the Finder Earn member confers their beneficial interest in cryptocurrency to Finder.
Broadly, the tax cost base of Finder Earn members' cryptocurrency will be the amount paid for the cryptocurrency, and the capital proceeds will be the right to receive that cryptocurrency back, which should generally have a value equal to the cryptocurrency receivable. The relevant date of acquisition will be the date the cryptocurrency is purchased, and the disposal date will be the date the member elects to use Finder Earn.
Note, where the value of TAUD remains equal to AUD, the above CGT event should not realise a capital gain or loss.
Similarly, when Finder Earn members end the loan of the cryptocurrency when they decide to withdraw their cryptocurrency from Finder Earn and sell their cryptocurrency back to Finder (i.e. when they convert their cryptocurrency back into Australian currency), another capital gains tax event will be triggered.
Broadly, the tax cost base of Finder Earn members' cryptocurrency will be the value of the right received (refer above) and the capital proceeds will the money value of the cryptocurrency received. The relevant date of acquisition will be the date the Finder Earn members exercises their right and the relevant disposal date will be the date the cryptocurrency is converted back into AUD.
Note, where the value of TAUD remains equal to AUD, the above CGT event should not realise a capital gain.
Where the cryptocurrency received as a fee is subsequently disposed of, the tax cost base will be the money value of the cryptocurrency when it was received, and the capital proceeds will be the market value of the cryptocurrency when it was disposed of.
Note, where the value of TAUD remains equal to AUD, the above CGT events should not realise a capital gain.
For Finder Earn members holding cryptocurrency on revenue account, the costs of purchasing cryptocurrency should be deductible and the sale proceeds should be assessable in full.
At what stage is the income declarable by Finder Earn members?
Income and losses are declarable in three stages, assuming the investment is held on capital account:
- Firstly, where the cryptocurrency is purchased and then loaned to Finder, a capital gains tax event will be triggered as the Finder Earn member will dispose of cryptocurrency to Finder;
- Secondly, where the fee is received by the Finder Earn members. The money value of the return will be assessable income to the Finder Earn members in the income year it is received; and
- Thirdly, where Finder Earn members' choose to end their loan of cryptocurrency to Finder, and their original cryptocurrency and further cryptocurrency (the fee) is disposed of (i.e. when the cryptocurrency is converted back into AUD), a capital gains tax event will be triggered.
Where the cryptocurrency is held on revenue account, the above amounts will be assessable as income to the Finder Earn member in the income year they are received.
Are Finder Earn members eligible for the 50% CGT discount where cryptocurrency is held for over 12 months?
As the relevant acquisition date and the relevant disposal date should generally happen within a short time frame, Finder Earn members will generally not be eligible for the 50% CGT discount.
Further, as discussed above, there will generally be no capital gain to discount where the value of TAUD remains equal to AUD.
This document is intended only as a general summary and does not purport to be a complete statement of all Australian income tax implications that may be relevant to Finder Earn members who lend cryptocurrency to Finder in exchange for a fee. The Australian income taxation implications of Finder Earn may vary depending on the individual circumstances of the Finder Earn members. We recommend obtaining personal and specific tax advice prior to the lodgement of the Finder Earn member's income tax return.
This summary is based on the Australian taxation laws in force and the administrative practices of the Australian Taxation Office ("ATO") generally accepted as at 31 May 2022. Any of these may change in the future without notice and legislation introduced to give effect to announcements may contain provisions that are currently not contemplated.
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