Have you ever wondered how you could save millions in tax on crypto investments? One conversation saved a client of mine millions of dollars in tax on his crypto investments.
I’ve always been considered a bit of a tech geek. Working in accounting practices, if there was ever an IT issue or someone was trying to figure out how to use some software, they would always come to me.
- Want to work out a formula in Excel?
- How do you do X, Y, or Z in that software?
- Having trouble logging in to this client’s file?
- Want to integrate this software with that one…
For stuff like that, people have always sought me out.
I am the guy who rapidly fires off photoshopped images responding to internal jokes and such.
You know… that guy.
Even when we got a dedicated IT guy on staff, still people came to me.
Honestly, I enjoyed the break from the monotony, and at times I would actually come across a challenge, which made it all the more fun. I was always the app guy, the IT guy, Mr. Fixit… and pretty soon it earned me the nickname “the Wizard.” I just loved bringing the magic.
In 2017, although I had been watching from the sidelines a little, I was properly introduced to the world of blockchain and cryptocurrency.
Pretty soon, I came to realise there was an amazing gap in the education of most people playing with cryptocurrency. For example, how were people recording cryptocurrency earnings, gains and losses, in their tax returns? How was it impacting their income assessment?
While this information was floating around, you might say it was open to interpretation… but for me, it was pretty black and white.
As I started joining groups, forums, chat rooms, seminars, and so on, I began to notice that most accountants either didn’t understand cryptocurrency, didn’t want to understand it, or had quite a different interpretation of the guidelines being provided by the Australian Taxation Office (ATO).
I started voicing my concerns around these different interpretations on social media platforms, and it wasn’t long before Cryptoliteracy was born to help educate people who were interested in venturing into the cryptoverse. Providing educational material to others about the reality of playing in the world of blockchain and digital currencies received mixed responses, but as time has gone on, my interpretation of the guidelines has proven more and more accurate than many accountants out there.
So, I got to work and started building some crypto tax software, which never quite made it to a standard that could be offered to you. However. I use it in my own practice for tax clients with cryptocurrency.
It was around this time that I was introduced to Gary.
Meet Gary
Gary was the kind of guy you might not even realise you walked past on the street. He was a pretty quiet bloke who kept to himself and didn’t really look like he had two cents to rub together.
One day, Gary comes into the office, makes some enquiries, and it was decided that this was one for “the Wizard.” So, I showed Gary to a meeting room where we sat and talked about his situation. Very quickly it became apparent that he was a bit of a crypto enthusiast.
You see, Gary was a great believer in Chainlink (LINK). He owned a lot of it. A. LOT.
It was worth almost nothing at the time, but he was adamant it was set to go gangbusters.
As Gary started talking about the roadmap for LINK, I caught a glimpse of who he was underneath the surface, and decided that I was going to help him out.
See, Gary understood the vision and had basically put everything he had into LINK. In fiat terms, he really didn’t have much to his name, but what he would have if LINK ever took off is an enormous tax bill and a massive Centrelink debt to go with it.
Having recognised these issues early, I advised Gary to set up some structures to protect his LINK holdings, to limit the tax ramifications if and when he started realising gains, and to handle the incoming Centrelink debt he was bound to land.
I prepared his tax return and delayed lodgment as long as possible, since Gary had liquidated some of his LINK holdings to cover his cost of living expenses and now had a tax debt he couldn’t really afford at that time.
On top of that, he was now faced with an accountant bill which needed paying, but I waived a good portion of it to make it affordable… and also delayed any need for payment until a time he felt comfortable. Gary wouldn’t have it, though. He scrounged up the cash and paid the bill in full immediately.
Foresight Saved Millions
Months and months went by and Gary’s net worth didn’t really change too much.
The price of LINK pushed up a little, then dropped away, then pushed up a little more, and dropped away again… and then suddenly, BAM! LINK took off.
Gary went from being a quiet bloke on a disability pension living in his mate’s spare room because he couldn’t afford his own place to being a multi-millionaire in a real hurry.
He knew it was coming. He saw the vision, and he went all in. It took time, but he held on and he was proven right.
What he didn’t know, however, was what it meant for him when it came to managing any tax implications, and the best way to prevent any other claims on his holdings. That’s why he came to see me.
No one else in the firm took Gary seriously, but as soon as I heard him speak, I was on that train.
Had anyone else spoken to him that day, they would have taken one look at the guy and wondered how he would even pay for that meeting, let alone afford to set up entities to minimise risk and tax liabilities associated with enormous profit potential. Heck, they would have thought he was crazy when he started talking about where LINK was headed… but not me.
Thanks to that conversation, Gary has literally saved MILLIONS of dollars in taxes, eliminated his tax debt, dealt with Centrelink, and set himself up for the rest of his life, never having to worry about how to afford housing ever again.
One conversation did that for him, and it was my privilege to have been the one to have helped.