1 Willthe compassionate payment you received from AA be assessable under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) as ordinary income or under the capital gains tax provisions of the ITAA 1997 as statutory income?
The compassionate payment you received from AA will be assessable as a capital gain. Question 2 Will the compassionate payment that is paid in respect of your investment reduce the cost base and reduced cost base of your investment? Answer No. Issue 2 - First BB cryptocurrency payment Question 3 Willthe first BB cryptocurrency payment in NN units of Ethereum you received reduce the cost base and reduced cost base of your original investment? Answer No. Question 4 Will the NN units of Ethereum payment that you received form part of the separate cost base? Answer Yes. Question 5 Willthe first BB cash payment paid in respect of your cash balance with BB be assessable income under section 6-5 of the ITAA 1997 as ordinary income or under the capital gains tax provisions as statutory income? Answer The first BB cash payment and the market value of any property received at the time represent capital proceeds of a CGT event and will be assessable under the capital gains provisions. Issue 3 - Further BB cash payments Question 6 Willthe amount of any further BB cash payments paid in respect of your remaining units of Ethereum reduce the cost base and reduced cost base of your investment?
Answer No. Question 7 Assuming the answers to any or all of Questions 2, 3 and 6 are 'Yes' and assuming the cost base and reduced cost base of your investment has been reduced to nil, will any further amount of the AA compassionate payment or further BB payments paid in respect to your investment result in a capital gain? Answer Not applicable. Question 2, 3 and 6 are all no, therefore this question is not applicable. This ruling applies for the following periods : Year ended 30 June 20XX Year ended 30 June 20XX The scheme commenced on: 28 September 20XX
You are a self-managed superannuation fund (SMSF) that manages its compliance obligation via AA, a digital platform that allows its clients to establish and administer their SMSF. You invested in digital assets and fiat currency as part of your SMSF holdings. You currently do not have any intentions to wind up your SMSF. You currently do not have any intention to dispose of your investment. Digital assets and fiat currency holdings You deposited cash with BB in order to purchase digital assets and fiat currency. You provided us with details on your investment with BB. BB operated a digital asset and fiat currency exchange through its website whereby BB's clients could invest, trade, deposit and withdraw digital assets or fiat currency. BB had a data sharing agreement with AA. You provided us with details on that terms and conditions that you agreed to when you created an account with BB. Administration of BB On a specified date, BB entered into a broker agreement with CC. On a specified date, BB transferred assets worth a specified amount to CC.
On a specified date, CC was placed into bankruptcy in the United States of America and CC's Australian entity was placed into voluntary administration. On a specified date, BB announced the freezing of all deposits and withdrawal from the exchange but allowed trading on the exchange to continue. On a specified date BB was placed into voluntary administration and trading on the exchange was suspended. You provided details of the market value of your investment with BB on a specified date. On a specified date, BB administrators released a report setting out options available for BB's future including details of a proposed Deed of Company Arrangement (DOCA). On a specified date the DOCA was executed, and a creditors' trust was created. The DOCA was terminated, and the creditors' claim dealt with under the creditors' trust. You provided us with a copy of the DOCA and Creditors' Trust Deed. Payment expected to be received by you from the creditors trust The DOCA outlines the distributions that are proposed for you to receive for your digital assets and fiat currency from BB. First Distribution
You will receive a distribution/payment equal to a specified percentage of the value of your Ethereum balance and cash balance valued as of a specified date. The payment was paid in the proportion of the Ethereum and cash held with BB on a specified date. In accordance with the DOCA, the Ethereum allocated was based on the market price of Ethereum at the rebalance date of a specified date. You received NN units of Ethereum and part of cash balance held with BB on a specified date. Further distributions Over the course of a specified number of years, further distribution may be made in satisfaction of the remaining amounts owing up to a maximum of a specified percentage of the value of the Ethereum and cash balance as of a specified date. Any further distribution/payment in respect of the remaining units of Ethereum owing to you will be made in cash rather than Ethereum. You provided us with details on the maximum amount that you will receive over the specified number of years.
The distributions will be paid to you in cash and are paid based on BB's financial performance and ability to produce net profit on a quarterly basis over the specified number of years and from the next proceeds of any distributions to BB from CC. At the time of the private ruling request, you have not received any of the further distribution payments. Payments to be received by you from AA Due the financial impact on AA clients, AA proposed to make a compassionate payment to its clients providing you signed a Deed Poll of Release. You provided us with details on the data that The Deed Poll of Release was executed. You provided us with The Deed Poll of Release. You provided us with the date that you received the compassionate payment (a one-off payment) from AA. Assumptions It is assumed that you are not prohibited from investing in digital assets and your investment meets the following criteria: § It is allowed under your trust deed, § it is in accordance with your investment strategy, and § complies with the same regulatory requirements as apply to other investments as set out in the Superannuation Industry (Supervision) Act 1993 (SISA) and
Superannuation Industry Supervision Regulations 1994 (SISR).
Income Tax Assessment Act 1997 section 6-5 Income Tax Assessment Act 1997 section 6-10 Income Tax Assessment Act 1997 section 104-5 Income Tax Assessment Act 1997 section 104-10 Income Tax Assessment Act 1997 section 104-25 Income Tax Assessment Act 1997 section 108-5 Income Tax Assessment Act 1997 section 110-25 Detailed reasoning Assessable income Subsection 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997) provides that the assessable income of an Australian resident includes income according to ordinary concepts (ordinary income) derived directly or indirectly from all sources, whether in or out of Australia, during the income year. Further, amounts which compensate for lost income or serve as a substitute for other income are themselves income according to ordinary concepts. Howev