Issue

Entity has received Airdrop tokens as part of their Cryptocurrency investments. How are these processed?

Scenario

• If an Airdrop is received as part of initial allocation without any payment made for the tokens, they have cost base of zero.
• The tokens don’t have a market value at the time of the initial airdrop as they have not been previously traded. In this case the ordinary income is zero.
• If the Airdrop is received to the wallet address and has market value  on the day of airdrop, the market value is the cost and it is treated as an ordinary income.

Resolution

Processing for Cryptocurrency set up as an Unlisted Investment

Create Investment Holding from Business or Entity Level

Navigate to Entity Level > Transactions > Investment -Buy > Non-Cash Acquisition

1. Select Holding Account for the Airdrop received
2. Enter Date
3. Enter Quantity
4. Enter Market Value (may be nil if tokens have not yet traded)

If the Market Value is nil:
Business Event will not be triggered. However, when this investment is disposed, it will trigger the CGT event. The discount then depends on the duration the investment is held to the date of disposal.

If the Market Value is not nil:

The market value of the underlying crypto on the day of airdrop is the cost. Match it to general investment income. CGT event is triggered when the asset is realised.

Processing for Cryptocurrency set up as a Custom Holding Account

For the Initial Allocation, we note a limitation with using Custom Holding Accounts. As the unit holding is set as one when the investment is setup, there is no option here to increase the quantity.

Our recommendation in this scenario is to setup a separate unlisted investment for free token and process a non-cash acquisition as per above. 

Again, if the Market Value is nil, there will be no Business Event created. If the Market Value is not nil, you will need to process a 'Cash In' into the Custom Holding Account and match this to a General Investment Income event.