Crypto Question: Pancake Swap - Is AutoStaking Daily Interest for Tax Purposes?

tulip99 on 20/09/2021 - 12:22

I'm doing my tax return and I bought some CAKE and autostaked it on Pancake Swap in June. Now I'm suddenly wondering if it pays interest daily? I haven't touched it since I put it in there.

Do I have to work out the daily interest and put each day in my tax return plus I'm guessing how much CAKE was worth each day ? (YUCK but doable if I can find the historical price of CAKE each day?). I don't have Koinly.

I'm going to an accountant but I don't know if he's a crypto expert so I'm doing it all myself and then he puts it on the computer with his tax forms.

Financial Cryptocurrency

Comments

  • Jimothy Wongingtons on 20/09/2021 - 12:35

    Im unfamilar with CAKE/Pancake swap but cryptotaxcalculator advertising staking calculations. Might be worth a look and consider you can claim the cost of the yearly membership.

    • deme on 20/09/2021 - 12:58

      I reckon it should be since it's a cost incurred in preparing your tax return.

  • shadyfat on 20/09/2021 - 12:43

    Good question, I think you need to account for each interest transaction for capital gains.

    • deme on 20/09/2021 - 12:58

      Interest won't be capital gains though?

      • netjock on 20/09/2021 - 13:19
        +2

        Income.

        A reason why you don't come here for advice.

  • deme on 20/09/2021 - 12:59
    -1

    I'm doing my tax return and I bought some CAKE and autostaked it on Pancake Swap in June. Now I'm suddenly wondering if it pays interest daily? I haven't touched it since I put it in there.

    Can someone explain what this means? Seriously I want to learn but when I googled:
    "Cheaper and faster than Uniswap? Discover PancakeSwap, the leading DEX on Binance Smart Chain (BSC) with the best farms in DeFi and a lottery for CAKE."

    I'm left with more questions

    • Jimothy Wongingtons on 20/09/2021 - 13:31
      -1

      All u need to know is it’s all internet Monopoly money where words are made up and weird pixelated pics of cats or rocks are worth millions.

    • maiuspala on 20/09/2021 - 14:06

      Dex= decentralized exchange
      Most exchanges are on etherium network, which has very high fees. Pancake swap is running on BSC network, which has very low fees.

    • tulip99 on 20/09/2021 - 14:18
      +1

      Pancakeswap.finance

      You buy Cake from an exchange like Binance and you put it in your Metamask wallet, then go to Pancakeswap.finance, open your wallet, choose the staking/syrup pool you want to put your money in. There's a small gas fee, not sure how much, and if you need BNB coin for the gas fee. I did it last year with buying BNB on Binance, putting it in my Metamask wallet, then going to Pancake swap and then changing the BNB on there to Cake. But the second time I did it, I bought Cake directly on Binance to save a reportable transaction.

      It's currently paying 82% apy HOWEVER THIS IS NOT FINANCIAL ADVICE, YOU COULD LOSE EVERYTHING IF YOU DO IT.

      IF YOU GO INTO THE FARMS YOU COULD LOSE MONEY OR ALL OF IT. I just do the staking on there in a small way. MAKE SURE YOU RESEARCH before you do anything and MAKE YOUR OWN DECISIONS.

      There are tons of videos on Youtube. Some people I like are CryptoDad, and Crypto Tips with Heidi, and Every Bit Helps (a British lady).

      The capitalisation is deliberate.

      • deme on 20/09/2021 - 14:41

        I bought Cake directly on Binance to save a reportable transaction.

        For privacy or tax?

        The capitalisation is deliberate.

        I don't get it. I know stocks like GOOG don't pay dividends but I can't understand how "paying 82% apy" can possible translate into a capital gain.

        Are you sure it's not providing a discount (100%) on capital (coins/pancakes?) ie. income?

        • tulip99 on 20/09/2021 - 15:16

          For tax. Instead of buying BnB (transaction 1) to swap for Cake (transaction 2) I bought Cake from Fiat (a total of 1 transaction).

          I'm not sure what you mean about it not providing a discount on capital? The 82% is interest (more Cake tokens) on top of your capital (the number of Cake tokens you put in) as far as I understand it.

          • deme on 20/09/2021 - 15:18

            @tulip99:

            The 82% is interest (more Cake tokens) on top of your capital (the number of Cake tokens you put in) as far as I understand it.

            Wouldn't that count as income?

            • tulip99 on 20/09/2021 - 15:29

              @deme: That is why I'm asking in here but it's autocompounding, etc, as others have said in here and complicated to work out. I haven't redeemed any of it yet so apparently it's still in the smart contract and not in my hot little hand as I understand from the answers in here.

              • deme on 20/09/2021 - 17:24

                @tulip99: Honestly I'd give the ATO a call they can be quite helpful.

                If you are in serious doubt you can request a https://www.ato.gov.au/general/ato-advice-and-guidance/ato-advice-products-(rulings)/private-rulings/applying-for-a-private-ruling/

                • tulip99 on 20/09/2021 - 19:22

                  @deme: Thanks. I searched for it in the ATO community and a couple people asked about this for autocompounding in crypto pools and they didn't have an answer for them.

  • rektrading on 20/09/2021 - 13:05
    -4

    Keep it simple.

    Capital out - capital in = gains/loss.

    Yield farming isn't coded for traditional accounting. Don't waste your time trying to work out the gains from auto-compounding. It's impossible.

    • sund00bie on 20/09/2021 - 13:19
      +2

      Wish i could do that with dividend reinvestment plans for stocks

      • deme on 20/09/2021 - 14:41

        Sharesight really helped me.

    • Mistredo on 20/09/2021 - 13:36

      Yield farming isn't coded for traditional accounting. Don't waste your time trying to work out the gains from auto-compounding. It's impossible.

      What? It is pretty simple, every time you receive coins you check how much they are worth in AUD, and you sum it up in your tax report.

      • rektrading on 20/09/2021 - 14:02

        That's not how it works.

        Auto-compounding is recorded at every block which is typically 28500 blocks p/d on BSC (this makes it impossible to calculate using traditional accounting tools). However, CAKE isn't paid out at every block. The tokens are farmed in a common pool and are only paid out when the users harvest the tokens.

        The users technically don't own the tokens until they harvest them. This means in legal terms that the pool has ownership of the tokens while they're earning yield.

        The users aren't liable for taxes on tokens they don't own.

        • Mistredo on 20/09/2021 - 14:20
          +1

          Sure, but it still triggers a tax event once you harvest them, and you need to tax it.

          • rektrading on 20/09/2021 - 14:35

            @Mistredo: Yes, at every harvest but not while it's in the pool.

            tulip99 can put the tokens in the pool on Jan 01, 2021, and harvest the tokens on Dec 31, 2021. tulip99 has legally relinquished the ownership of the tokens to the pool for 364 days. They will lose the tokens permanently if they don't harvest the tokens or if the frontend shuts down.

    • tulip99 on 20/09/2021 - 14:19

      Thanks.

    • cloudy on 20/09/2021 - 14:20
      +4

      Just because your investment code isn’t made for our tax system doesn’t mean you can ignore your responsibilities under the law. Just based on your presumption it’s safe to say anyone serious can ignore your advice.

  • sjj89 on 20/09/2021 - 13:09
    -1

    I believe crypto is ultimately only taxed when you draw it out as fiat. Until then it's untaxed. And you will get capital gains on the profit. Hold it for over 12 months minimum.

    • netjock on 20/09/2021 - 13:20

      Most likely. Need to take cash accounting. People are approaching this like they are an investment bank and doing mark to market accounting (profit and loss on paper profits / losses).

    • maiuspala on 20/09/2021 - 14:10
      +2

      Not only selling for fiat, but also swapping ome coin for another is a tax event

    • plmko on 20/09/2021 - 14:11
      +1

      That's completely wrong.

    • Mistredo on 20/09/2021 - 14:18
      +2

      That's not true. You need tax staking rewards as income.

      https://community.ato.gov.au/t5/Cryptocurrency/Staking-rewar…

  • dmgdx on 20/09/2021 - 13:26

    I interpret it as every wallet transaction adds a new CGT event. So the auto-compounding would only be counted when you claim the cake rewards. That way, if you leave it for a week and then withdraw, your CGT is the price difference for the original balance + the price at transaction time* the quantity of rewards received.
    Before you withdraw ownership of the tokens sits with the smart contract, when you claim that ownership is passed to you.

    Koinly would work the same way as they only get your transaction details, not daily accrual of cake.

    • tulip99 on 20/09/2021 - 14:21

      Awesome, thanks.

  • Mistredo on 20/09/2021 - 13:34

    Staking is like getting interest. Every time you receive a coin through staking it is a tax event.

  • wannagrababargain on 20/09/2021 - 13:46
    -3

    I think that the only time it matters is when you convert anything back to AUD. If you end up with more AUD than you started with then you pay CGT on the gain. It's not interest or income, it's capital gains from something akin to 'gambling.' Tax office doesn't care what happens to it in the fake monopoly world, they only care about AUD.

  • ozbargainerlife1 on 20/09/2021 - 16:07
    +1

    Extra coins that you receive from staking are income see here
    https://www.ato.gov.au/general/gen/tax-treatment-of-crypto-c…

  • gothebroncos on 20/09/2021 - 20:50

    Just get koinly to work it out - well worth the money - just import all wallets and exchanges and it will automagically work out the gain / loss.

    Every transaction is a CGT event - no matter if it is coin to coin or to fiat.

    I am in the auto compound pool for $CAKE as well as many others. $CAKE price holds up well and 82% is juicy

    • rektrading on 20/09/2021 - 21:08

      Can koinly get the price feed for the pool?

      • gothebroncos on 20/09/2021 - 22:08

        Works everything out for you - first time using the full paid feature this year. Is tax deductible too

        • rektrading on 20/09/2021 - 22:50
          +2

          The Koinly FAQ says the users have to manually flag the in/out Tx when interacting with the polls.

          Receiving staking rewards
          Whenever you receive a reward, you should tag the Deposit transaction as a "Reward". This way Koinly will be able to summarize all reward transactions in your Income report so you can declare it in your tax returns.

          Sending coins into a staking pool
          However, if you are using Ethereum or Binance Smart Chain then these transactions will get imported as withdrawals. You should find these and tag them as "Sent to Pool" to prevent gains from being realized on them.

          Receiving coins from a staking pool
          However, for Eth, BEP20 etc these transactions will get imported as Deposits. You should find and tag such transactions as "Received from Pool".
          Note that this only applies when receiving back the capital that was originally sent to the pool.

          It is very important to have proper Sent to Pool and Received from Pool pairs. If you tag a transaction as Received from Pool but have not tagged anything as Sent to Pool then you will see a "Missing purchase history" error because Koinly does not have any records of any coins being sent into the pool.
          https://help.koinly.io/en/articles/4928636-staking

          This tells me that Koinly doesn't interact with the pools. All it does is track the in/out Tx for the wallets and can't distinguish the difference between in/out Tx and interactions with pools.

          Koinly isn't coded to pull data from pools and should NOT be trusted to correctly calculate auto-compounding pools.

Login or Join to leave a comment
Login Join