as tax laws in some countries can be tricky i have an idea to make life easier for the cardano stakers out there.
as smart contracts are on the way and meld plans fiat wire transfers anyway is there a possibility that you would offer a service where users can lock staked ada in a smart contract that automatically sells the rewards at every end of an epoch and wires the money to a banking account?
Posted Sep 10, 2021, 7:54 PM UTC
Here in Australia, this applies as staking rewards are taxed as income as they are recieved. However, you also pay (or clam) capital gains tax at the time you sell them.
While this looks to simplify things...the calculation is still required to be done, albeit resulting in zero capitol gains
I don’t think that would circumvent any of the taxes due for your jurisdiction as it is still income/gain just the form of fiat rather than crypto - that behavior is a lot like the dividends you’d see from a stock or ETF.
Taxes, laws, regulations, and really all of not most things are best left to professionals, so it would be a good idea to consult one for your locality regarding this.
I don’t know enough to say for certain with regards the configuration of the smart contracts MELD will implement with the protocol, but a quick review of the whitepaper (page 30&31) makes it seem like it’d have to be it own contract that would also have to be accounted for with updates to the lending contract. While I find it an interesting option - If it’s even possible, it likely wouldn’t be for a long time (the roadmap doesn’t even project the start of fiat loans until 2022 for example)
I know that it is still a taxable event. But with automated selling on the day of reveiving the reward you are not at risk to have to pay taxes at the end of year with money you do not have. For example you get rewards when ada is at 10 dollars but do not convert to fiat. Then when taxday comes ada is worth 1. You still have to pay taxes for the reward when it was 10. You are basically fu**ed.
I think that’s a fair point, but I think there’d be other more alarming matters if we saw a drop in ADA from 10 down to 1 (just my speculation/opinion). Another aspect that would be important to consider with that is the lack of compounding
crypto is volatile and it was just an example. in many countries tax is paid for the value your crypto has at the time of receiving the reward. so if you convert at a later point you are at risk.
as a result people are afraid to stake at all. this would be a tax law compliant alternative to allow them to do so. in this case there would not be compound interest, but better than no interest at all.
sure you could go through the process of selling every epoch yourself, but it would be a pain in the ass.
Luckily MELD will soon allow folks to not have to exit their crypto positions to get fiat for situations such as this!
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Interesting......