Cryptocurrency tax is normally assessed using the capital gains system. However, it’s important to note that depending on your cryptocurrency activities, the ATO may consider these as business-like behaviour. This means that your cryptocurrency tax will no longer be assessed as CGT, but as business income tax. If this is the case, you will be taxed at the business tax rate (25%-30% depending on the tax year), and also be required to fulfill business obligations such as ABN registration.
Am I considered a business or individual for cryptocurrency tax?
The ATO considers the following activities as business-like:
- Operations are focused on short-term profits rather than long-term payoffs and investments.
- Undertaking business-like operations such as documenting strategy, market analysis and research, business planning, using dedicated operating/office space, and more.
- Significant capital investment in the operation, be it directly into cryptocurrency trading, the purchase of mining equipment such as ASICs, etc.
- Trading patterns that are high-volume, regular and repetitive over an extended period of time.
Unfortunately, there are no clear-cut rules on what the ATO considers directly as business activity, as they review each person on a case-by-case basis. What they do provide is a set of guidelines which are used to make decisions that you can use to make a self-assessment.
If you are regularly engaging in day trading, running a larger scale crypto mining operation, an artist minting NFTs to sell alongside your artwork, or operating some other form of crypto operation that could be considered business-like, it is best to consult an accountant so you are reporting your crypto taxes correctly and in the most tax-effective manner.
For more information, please consult the Are you in business? guide on the ATO website, or reach out to us for assistance.
With all the complexities of cryptocurrency tax, it’s best to consult an accountant so you’re fully aware of your tax obligations as an individual or business. Feel free to reach out to our friendly accountants at POP if you need advice, support or cryptocurrency tax accounting services.
Crypto Tax Returns
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Investing & Trading have different Cryptocurrency Tax Obligations
Crypto Investing
For investors, cryptocurrency tax is reported similarly to shares using the CGT system.
You record the AUD value of the currency at the time of purchase and the AUD value at the time of selling. The difference between these two values is then reported as a Capital Gain or Capital loss on your tax statement.
For example,
If you purchased 1 Bitcoin in 2021, at $70,000 and sold it at $80,000 that same year, you have made a $10,000 capital gain in that year. You would then be reporting this $10,000 capital gain in your tax return, of which you will have to pay tax on 100% of this amount.
As the normal capital gains tax rules apply, if you held this coin for more than 1 year, and sold it for a $10,000 profit, you would only have pay tax on 50% of this capital gain ($5,000).
When reporting capital gains, this value is added to your total personal income, meaning you will be taxed at your personal income bracket. Capital losses on cryptocurrencies can be used to reduce your taxable income in the next financial year.
Crypto Trading
The ATO classifies people who engage in crypto in a business-like manner or operate a crypto business, as traders.
This could include:
- Day traders who purchase and sell/dispose of cryptocurrencies multiple times a day or week for extended periods of time.
- Crypto mining businesses. See this blog for more details.
- Artists minting NFTs and selling them alongside their artwork as part of a business operation.
- Cryptocurrency exchanges, ATMs, & businesses that receive payments/deposits of crypto and/or distribute it
- etc.
If you are considered a cryptocurrency business or trader, business income tax will apply to the following:
- mining crypto
- earning crypto through staking, yield farming & airdrops
- getting paid in crypto
- disposing of crypto as part of a business activity
Crypto traders and businesses are also subject to the trading stock rules outlined by the ATO. They will also be subject to the usual business and tax compliance obligations applicable to businesses and companies. Such as registering for an ABN as well as declare GST (once you have $75,000 in turnover).
Crypto Tax Returns with POP Business
Crypto tax sure is complicated isn’t it? If you need a hand sorting out your crypto taxes, get in touch with us today. We offer crypto tax returns for individuals and businesses and ensure accurate ATO crypto tax compliance with through our partnership with Crypto Tax Calculator and their advanced reporting software.
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