This article has been updated with comments from Alex Saunders, who said he is coordinating the donations with numerous exchanges, and that the exchanges plan to liquidate the funds regularly.
Think twice before donating large amounts to Alex Saunders’ crypto bushfires if you’re worried about paying taxes, an Australian tax accountant told Decrypt.
Since launching an appeal on Twitter, Saunders, who runs Australian crypto news channel Nugget’s News, has encouraged donations of over $13,000 in Bitcoin, Bitcoin Cash, ETH, and Litecoin (if we’ve done our math right), and also pointed people in the direction of crypto exchange Binance’s charity platform, which so far has received donations of around $1 million —mostly from Binance itself—according to the site’s page.
Saunders told Decrypt he’s made his appeal on behalf of numerous exchanges to make sure the funds go to charities, such as the Rural Fire Service, a volunteer fire service that operates in New South Wales.
https://twitter.com/AlexSaundersAU/status/1213323172763684864
“We can assume that his motives are noble, but there are considerable tax implications for those that contribute to the fund,” Paul Drum, head of policy at professional accounting body CPA Australia, and a member of Blockchain Australia’s Tax Working Group, told Decrypt.
Drum said that Australians donating to Saunders’ fund might be liable for capital gains tax, since the exchanges Saunders represents aren’t registered charities, and cryptocurrencies are classified as a commodity under Australian tax law, not money.
Because cryptocurrencies are an asset, said Drum, donating to Saunders’ fund could trigger a “taxable event”. If the value of a donor’s crypto increased since they purchased it, they might have to pay capital gains tax on it. American donors, too, would have to pay capital gains tax.
Because there’s a delay between the time the exchanges receive the funds and the time they disburses them to charities, Drum said the exchanges might also be liable for capital gains tax, too.
After all, said Drum, “This is the beginning of the bushfire season. It's not over. February is going to be our hottest month, so there's more bushfires to come, and the bushfires that started last November aren’t out.”
Saunders told Decrypt that he’s working against this. “The exchanges involved will regularly liquidate the funds; we are doing so today, as we don't want to hold on to them for any length of time where significant price movements could occur.”
In any case, his tax lawyers have told him not to worry: “If people are donating with the intent to give that much value, it's not like you're investing or trading. If there's a minor fluctuation up or down or I don't think that triggers any taxable event,” he said.
Parting advice
Alex Wilson, co-founder of The Giving Block, a platform that facilitates crypto donations to charities, told Decrypt, “Donors should be cautious when donating to individuals or foreign charities and make sure they understand the tax implications.”
For US donors, he gave the following advice: “Donating crypto to nonprofits can lower your taxes because you do not have to pay capital gains tax and can write off the donation on your taxes.”
Wilson noted that US taxpayers donating to a 501c3–that is, a registered charity—“your gift is generally tax-deductible. But things get tricky when you start making donations internationally. When donating, always confirm the organization collecting the funds is a 501c3 nonprofit (or non-US equivalent).”
Still, consider tossing a couple Satoshis—or, ya know, regular money—to a good cause.