CGT liability for a trading account in a single name

If I:

• Open a trading a account in a single name (because there is no option for a joint account)
• Moved funds into the trading account from a joint bank account
• Made a profit with the trading account
• Moved funds back into the joint back account

Would it be possible to split any CGT liability between the two joint bank account holders as the assets remained jointly owned? Or does the fact that the profit was made in a trading account in a single name, make that person solely liable for the CGT?

 

1. How do you know its a CGT gain and not ordinary income ?
2. Is the period of the holding less than 12mths ? In which case the gain wouldnt be discounted anyway.

The type of entity largely makes no difference to capital gains. Of course if the account is in your name its your personal tax issue unless you were acting as a trustee. The tax rate applicable is based on the marginal tax rate. However a company may pay a lower fixed tax rate but gets no discount.

It doesnt sound like you understand the key concepts and advice may be of benefit.

 

I will be seeking specific advice at tax time. What key concept(s) don't I understand?

I use the term 'trading account' only to identify an account used to buy assets.

1. Because I am holding the assets as an investment, not carrying on a business of trading. Shareholding as investor or share trading as business?
2. It will be longer than 12 months, but even if not, wouldn't there still potentially be a benefit in splitting the gains between two people where the trading account owner was in a higher tax bracket?

The reason I am looking to split the CGT is because each individual is carrying forward a net capital loss.

Does there need to be a formal agreement to be acting as a trustee?

FWIW the assets I am talking about are crypto assets.

What if the personal account was only used as a medium for buying the assets, so the process was:

• Moved funds from a joint bank account to trading account in one name
• Purchase assets in trading account
• Moved assets to a private wallet (which has no recorded 'account ownership')
• Asset increases in value
• Moved asset back to trading account to cash out into joint back account

Any thoughts?

 

The issue with names occurs with crypto a bit. Most exchanges wont allow a AU company name registration and hence dont allow a trust either. I have always suggested that where a individual acts as a custodian for a trustee or company etc that this be documented prior to any trading or funds transfer etc.

Crypto trading is unlikely to be a CGT asset. Crypto acquired to hold long term may be. Doing both will affect the CGT position. I do have a client that does both and he maintains two distinct accounts / wallets etc for this and it was documented from the start.

Arguing the profits are joint however just because the funds were once joint wont fly. Why wasnt a joint trading account established ? And doing so for the purpose of the c/fwd loss seems like you are now seeking to correct a issue that has become evident.

You could provide evidence of the arrangements to the ATO and seek a private ruling.

 

I'm not actively 'trading', I am buying and hodling. The account only has buy orders between when it was established in November 2017 and this month, no sell orders. One day I will start lightening the positions or sell it altogether.

It wasn't possible to establish a joint account (and AFAIK still isn't) on the platform I use.

If it was possible at the time I would have created it as a joint account.

The funds have always been jointly owned. I am not trying to change the purpose/ownership of the crypto assets just because of the loss being carried forward (which is unrelated to crypto), it is just one of the reasons I would be keen to see if it's possible to split the CGT liability.

 

You would have to argue that you were bare trustee for your spouse. Its a possibility

 

no

 

Thanks @Terry_w, will have a chat to my accountant about it at tax time.

 

The difficulty will be convincing the commissioner

 

I think that quote fits well!

 

But without it there is no evidence of any relationship.

Q : Why wasn't the issue a concern back when the account was opened but it is now ?

Thats a rhetorical question but indicates that the taxpayer position may have been better committed to writing etc at its earlier occurrence rather than after the event.

"Funds" arent the issue in question. Thats irrelevant to a degree but may assist a argument that the intention was for the single trading name to reflect that of the parties. eg a trustee arrangement. . Spouses dont have to equally contribute funds to be joint owners of any assets.

Personally due to the sum involved I would commit what was agreed to writing and that explains why and that indicates the intentions of the joint position of the parties to trade using a single named account (in capacity as a custodian rather than a legal owner as such) as the exchange limits the correct legal names you would have preferred to use and also seek a binding private ruling based on the intentions etc.

As a tax adviser I wouldnt be inclined to recognise both names without a BPR. It would be reckless and inconsistent with legal ownership and as I'm not a lawyer I cant advise myself on the issue. I could be exposed to a PI claim and / or being reprimaded by teh TPB. The ATO is referring more and more advisers to the TPB for discipline. (Tax Practitioners Board)

 

It was a concern. As mentioned above I would have opened in joint names if available to me at the time, but it was either open in one name or I didn't have any (safe) way to buy the assets.

I still don't even know if it's possible to open a joint (personal) account with most crypto exchanges today, I suspect not due to the nature of the asset.

 

Whose name is HIN in? Single name or joint?

 

HIN's don't existing in the wild west of crypto

 

Right. I thought we were talking shares. Carry on lol.

 

Coin = No HIN. HIN is a listed security issue in Australia only

 

BTW - I have a client in this exact position. He raised the issue with me when he created the trust crypto account. Must be in his name he said. There is documentation on file concerning this and I feel we have compelling evidence that the account is that of a disc trust. Neither the trustee or the trust interest can be shown.

Trustee has resolved in writing at that time to permit trust funds to be traded on account XYZ0001 held in name of Fred Smith as a custodian or any wallet required to hold currencies "from time to time". Copies of email exchanges dated prior to trades supporting this. Copy of email from exchange refusing to allow change of names or even customised account description etc. All noted in our calendar and filing system and retrievable. Client sought legal advice and lawyer suggested what we had demonstrates nature of the position of the parties and he would be unlikely to add any extra benefits.

A SMSF however may be found to be in breach of SIS Act to do this however. All SMSF investments must be held separate from that of the member and the trustee. In some instances a caveat may be needed for property where the SMSF has human trustees. I havent found a coin exchange that allows such issues to be added to the account.

That said our preferred SMSF auditor says he qualifies every fund if it has crypto since he cant verify ownership or existence. His professional body mandates this for PI cover.