Australian Tax Office allows you to claim for lost (incl. stolen) private keys

TheCoinGrabber

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Quote from: rosezionjohn on August 09, 2019, 04:19:47 AM

Quote from: TheCoinGrabber on August 08, 2019, 10:51:00 AM

I'm interested in how this will turn out. My only concern is, if you make a claim that you lost your private key, wouldn't you make it to some watchlist of possible tax evaders or something?

The Australian Tax Authorities will likely create a list of public addresses of wallets with missing/stolen priv. keys then monitor them on a yearly basis. I am not sure if they are really equipped in monitoring wallets with stolen keys. Just thinking of how they'll come after lying citizens gives me a headache.

Quote

I mean, do people really declare the amount of bitcoins they have in the hardware wallets?

Who knows. Some people do, some people don't.

Yes, it's gonna be a headache. I'm expecting they'll track the previous transactions from those address to try to find if they were indeed had bitcoins stolen (I mean, the owner can just move it somewhere, withdraw and then claim theft).

I can't see any obvious benefits to the Aussie government.

James1970

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Looks like Australia is the most progressive country in terms of crypto tax laws

Lucius

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Quote from: shield132 on August 07, 2019, 04:24:37 PM

Is that the real reason why some guys want to buy empty bitcoin wallets with old transactions?

I was thinking the same, maybe someone is trying to prove that his private keys are lost / stolen, and if you have private key of address which hold a considerable amount of coins you can sign message from that address as proof that this is your address. However, it is hard for me to believe that the Australian government would be so naive, there is probably some catch 22 in all this story.

For me only proper way to try to prove that you are victim of lost / stolen private keys would be to report coin address/es with signed message for every address that hold some coins before something bad happens. So if you get hacked there is some chance to report a capital loss, but there is big problem how to successfully prove that the loss really did occur, and that it was not a financial fraud.

rosezionjohn

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Quote from: TheCoinGrabber on August 08, 2019, 10:51:00 AM

I'm interested in how this will turn out. My only concern is, if you make a claim that you lost your private key, wouldn't you make it to some watchlist of possible tax evaders or something?

The Australian Tax Authorities will likely create a list of public addresses of wallets with missing/stolen priv. keys then monitor them on a yearly basis. I am not sure if they are really equipped in monitoring wallets with stolen keys. Just thinking of how they'll come after lying citizens gives me a headache.

Quote

I mean, do people really declare the amount of bitcoins they have in the hardware wallets?

Who knows. Some people do, some people don't.

TheCoinGrabber

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I'm interested in how this will turn out. My only concern is, if you make a claim that you lost your private key, wouldn't you make it to some watchlist of possible tax evaders or something? I mean, do people really declare the amount of bitcoins they have in the hardware wallets?

BitHodler

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Quote from: almightyruler on August 07, 2019, 07:52:12 PM

By introducing this rule, the tax office is acknowledging that a loss of a private key will result in an absolute, unrecoverable financial loss.

It's at least a step in the right direction if you can provide the evidence that will satisfy the tax office. If I for example claim that I no longer own the private key of a certain address, the tax department doesn't really care.

I am obliged to pay tax over whatever the amount is inside the address. In other words, you are better off not bringing it up, which is just retarded, especially when you have to pay taxes over that amount every single year. This needs to change.

If this Australian tax rule stimulates other governments to look into their tax policies and change where necessary to cover this specific subject, that would be a more than welcome development.

almightyruler

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Quote from: shield132 on August 07, 2019, 04:24:37 PM

Is that the real reason why some guys want to buy empty bitcoin wallets with old transactions?
For example check this thread: https://bitcointalksearch.org/topic/i-pay-you-100-for-your-to-sign-me-a-msg-with-your-bitcoin-or-ethereum-address-5170635
Because they can claim it was their wallet, money was stolen and then they'll really lose keys and finally end up with tax deduction, good win.

That's an interesting thread, and the required time period is oddly specific.

Quote from: shield132 on August 07, 2019, 04:24:37 PM

But on another hand, why do Australians want to take care of this? They'll have to monitor adresses, wouldn't it be better to just ignore and don't make this rule? Because seems headache with no benefit.

Well, at least it's progressive thinking by a major government department, even if ultimately the whole thing fails due to fraud and/or enforcement overhead. By introducing this rule, the tax office is acknowledging that a loss of a private key will result in an absolute, unrecoverable financial loss.

shield132

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Is that the real reason why some guys want to buy empty bitcoin wallets with old transactions?
For example check this thread: https://bitcointalksearch.org/topic/i-pay-you-100-for-your-to-sign-me-a-msg-with-your-bitcoin-or-ethereum-address-5170635
Because they can claim it was their wallet, money was stolen and then they'll really lose keys and finally end up with tax deduction, good win.
But on another hand, why do Australians want to take care of this? They'll have to monitor adresses, wouldn't it be better to just ignore and don't make this rule? Because seems headache with no benefit.

Theb

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It still is considered as a tax deductions as you are lessening your taxes it's kinda like how expenses work on deductions towards your income so it's still considered "tax deductions" in legal terms. This is sort of a no-brainer when it comes to any tax obligations since a stolen or an unretrievable private key is already considered lost or stolen so if the Australian government tries to tax you with the funds you don't have access with then they are just simply greedy of your money.

Mahanton

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Quote from: buwaytress on August 07, 2019, 04:50:39 AM

So has anyone at all come up with a way to prove that their private keys are stolen? Or lost? I can't think of anythibg that would prove it.

Even if funds were moved out and provably shown to have been transferred to an exchange, say, and somehow proven to be shown to have transferred out to someone as cash, who's to say the owner didn't arrange all that.

I'd like to know what the Aus govt knows we don't!

Same thing goes to my mind on how they would able to know that a user isn't really playing behind or just giving out false claims.?
Its almost impossible to recover hacked funds how much more on verifying if a certain user really owns that PK? I cant think off such thing.

MonsterV

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Quote from: buwaytress on August 07, 2019, 04:50:39 AM

So has anyone at all come up with a way to prove that their private keys are stolen? Or lost? I can't think of anythibg that would prove it.

Even if funds were moved out and provably shown to have been transferred to an exchange, say, and somehow proven to be shown to have transferred out to someone as cash, who's to say the owner didn't arrange all that.

I'd like to know what the Aus govt knows we don't!

Haha right, this will be a case that goes round and round without any clarity. It is a little strange indeed, how the Australian government will track down a person who lost their private key while the police like the FBI alone cannot solve the crypto hacking.

Surely many of its people will claim that they have lost their private key to avoid taxes. Maybe if they lose money in the exchange they use it still makes sense, because they will have a guarantee of the exchange he uses. But I don't know, how the aus government will wear out this kind of problem later. so let's just look at further developments.

kaya11

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Quote from: almightyruler on August 05, 2019, 12:55:48 PM

https://www.ato.gov.au/general/gen/tax-treatment-of-crypto-currencies-in-australia---specifically-bitcoin/?anchor=Transactingwithcryptocurrency#Lossortheftofcryptocurrency

Thought this was interesting: if you can prove loss of a private key, you can claim a capital loss on your tax return.

A capital loss is not quite the same as a tax deduction, but it does mean that you can use that loss to offset other capital gains.

Proving a complete loss of your private keys could be an interesting exercise, particularly if the situation is not a slam dunk (like a HD crash with no backup.)

What if they only wanted to know that you were pioneering investors in Bitcoin =, the time when it was just bucks and then forgot your key. Now they want to know if it is real and then get your information, then crack your password base on what you give them, now if they manage to do so then it is a win win situation, they got your btc and all of that is left for you is a percentage of its tax, so clever government.

buwaytress

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So has anyone at all come up with a way to prove that their private keys are stolen? Or lost? I can't think of anythibg that would prove it.

Even if funds were moved out and provably shown to have been transferred to an exchange, say, and somehow proven to be shown to have transferred out to someone as cash, who's to say the owner didn't arrange all that.

I'd like to know what the Aus govt knows we don't!

7788bitcoin

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Quote from: almightyruler on August 05, 2019, 12:55:48 PM

Thought this was interesting: if you can prove loss of a private key, you can claim a capital loss on your tax return.
A capital loss is not quite the same as a tax deduction, but it does mean that you can use that loss to offset other capital gains.
Proving a complete loss of your private keys could be an interesting exercise, particularly if the situation is not a slam dunk (like a HD crash with no backup.)

It is a really interesting clause for the Australian citizens who does have an option to get tax benefits if they play smartly, i am not telling that anyone should break the law but bitcoin opens new financial avenues and there is nothing wrong in taking advantage of the situation. Fiat currency and other market possess a much greater loss as bitcoin can be tracked back to the seller, i am sure many people will be taking advantage of this rule.

hatshepsut93

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Quote from: o_e_l_e_o on August 05, 2019, 02:24:32 PM

What is to stop someone trading all their coins out peer to peer for cash, and then saying that they had their wallet.dat file/mobile phone/computer stolen, and claiming a capital loss to offset their other taxes.

Nothing, but it would be a tax fraud, and if they will get caught they'll be severely punished for that. So, I don't view it as some sort of loophole to avoid taxes. Notice how you said that you need to cash out in p2p manner for cash, it makes this equal to most other forms of tax evasion, because the only thing that matters is how good you hide your money. So, you could theoretically do this thing with "stolen" coins, but then a tax officer will ask you if that Lambo with BITCOIN numbers is yours, and why it's not declared, and with what money you have bought it.

joniboini

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Quote from: goinmerry on August 05, 2019, 06:25:41 PM

1. when you acquired and lost the private key
2. the wallet address that the private key relates to
3. the cost you incurred to acquire the lost or stolen cryptocurrency
4. the amount of cryptocurrency in the wallet at the time of loss of private key
5. that the wallet was controlled by you (for example, transactions linked to your identity)
6. that you are in possession of the hardware that stores the wallet
7. transactions to the wallet from a digital currency exchange for which you hold a verified account or is linked to your identity.

I can't imagine how long this will take. Making sure that the proof is not fake would take a lot of time imo.

It would be simpler if they make a database where everybody can register their private (but of course with identity details required). Of course, you can't claim if you never submit the key before.

goinmerry

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These are the evidences needed:

1. when you acquired and lost the private key
2. the wallet address that the private key relates to
3. the cost you incurred to acquire the lost or stolen cryptocurrency
4. the amount of cryptocurrency in the wallet at the time of loss of private key
5. that the wallet was controlled by you (for example, transactions linked to your identity)
6. that you are in possession of the hardware that stores the wallet
7. transactions to the wallet from a digital currency exchange for which you hold a verified account or is linked to your identity.

Maybe the closest thing I can provide is the Number 6. But I'm afraid they will tagged me as a robber instead lol.

dothebeats

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The practicality of this idea is literally none, knowing that there are no definite ways to prove that you are in control of a particular address at some point. For the most part, it could be gamed upon and be taken advantage by people just to make the most out of tax deductions. Anyway though, this would be interesting to keep an eye on, especially on how would the Australian Tax Office monitor those who claimed that their funds are lost and what measures would they take should the involved party turned out to be a fraud.

Heck, 10 years passed since bitcoin's inception and we still can't discern whether an address' funds is completely lost in the void or not.

almightyruler

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Quote from: o_e_l_e_o on August 05, 2019, 02:24:32 PM

I have no idea how they are going to work this practically. There is zero way to prove you no longer have the private key.

Agreed. Someone could claim their funds were stolen when in reality they just sent them to a mate who paid them cash. There's no mention of a Police report in the list of requirements.

Claiming lost keys would require ongoing monitoring of the addresses by the tax office. What happens if 5 or 10 years after the claim is made, the funds move out?

I think it's a good system for people who have genuinely lost access to their funds, but it's going to be tainted by people making fraudulent claims.

o_e_l_e_o

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I have no idea how they are going to work this practically. There is zero way to prove you no longer have the private key. I could show you a broken hardware wallet or an encrypted wallet.dat file, but there is no way for you to prove I don't have a second device, the same wallet accessible elsewhere, the mnemonic seed written down or even memorized, etc.

What is to stop someone trading all their coins out peer to peer for cash, and then saying that they had their wallet.dat file/mobile phone/computer stolen, and claiming a capital loss to offset their other taxes.

almightyruler

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https://www.ato.gov.au/general/gen/tax-treatment-of-crypto-currencies-in-australia---specifically-bitcoin/?anchor=Transactingwithcryptocurrency#Lossortheftofcryptocurrency

Thought this was interesting: if you can prove loss of a private key, you can claim a capital loss on your tax return.

A capital loss is not quite the same as a tax deduction, but it does mean that you can use that loss to offset other capital gains.

Proving a complete loss of your private keys could be an interesting exercise, particularly if the situation is not a slam dunk (like a HD crash with no backup.)

Topic: Australian Tax Office allows you to claim for lost (incl. stolen) private keys (Read 283 times)