Accountants South Yarra

Crypto traders, miners and the Australian tax system

cryptocurrency traders and miners

OUR SERVICES

Can trading or mining be taxed?

Any profit you make through day trading, swing trading, or mining any cryptocurrency must be included in your assessable income. Cryptocurrency traders and miners are operating a business under ATO criteria.

Although investors and traders seek profits from the cryptocurrency market, investors typically seek higher returns by purchasing and holding investments over a longer period. In contrast, traders take advantage of both rising and falling markets to enter and exit positions in a shorter timeframe. This is what words like “buying the dip” refer to.

Work with an accounting firm like Ingrams Accounting, which understands the ins and outs of cryptocurrency taxation to maximize the profits you keep from your trading or mining operation.

Speak to cryptocurrency traders and miners accountants today.

cryptocurrency investors

How is money from crypto trading or mining taxed?

Any income derived from the transfer or sale of cryptocurrency traders and miners assets is deemed assessable income under ATO criteria if you are in the business of trading or mining cryptocurrencies. Any expenses made in connection with those activities, including the original purchase of the cryptocurrency, would be deductible. These cryptocurrencies are valued in the same way that stocks are valued.

As an individual trader, any earnings are added to your other income for the fiscal year and taxed at your marginal tax rate. Losses are deducted from other income for the fiscal year, lowering an individual’s tax liability.

Business income from cryptocurrency traders and miners is a little different. Profits are added to other income for the fiscal year and taxed at the company level with the standard tax rate of 26% (2021) and 25% (2022) for businesses.

For Self-Managed Super Funds, any profits are added to other income for the fiscal year and taxed at the standard rate of 15%.

For discretionary trusts, any profits are added to other income for the fiscal year and distributed per Trustee instructions.

For fixed trusts, any profits are added to other income for the fiscal year and distributed following unitholding. Speak to cryptocurrency traders and miners accountants today.

Are you a hobbyist or a mining business?

If you’re mining cryptocurrencies for a living, you’ll need to figure out whether you’re a hobbyist or a business. The rules are as follows, but keep in mind that there is some grey area.

Hobbyist cryptocurrency miners

A hobby miner mines cryptocurrencies as a personal interest or hobby rather than as a full-fledged business to make money. Their mining equipment investment will be minimal, and their mining operation will most likely be a small-scale setup in their house.

If you’re a hobby miner, this is how you’ll be taxed under ATO guidelines.

  • The cost of equipment is allocated as a cost of acquisition of the rewarded coins
  • Running costs are also allocated as a cost of acquisition of the rewarded coins
  • If you sell any rewarded coins within 12 months of acquisition, your gains are considered 100% tax assessable
  • If you hold onto rewarded coins longer and sell them after you’ve held them for 12 months, they are considered 50% assessable
  • Coins rewarded are considered capital acquisition and not income

Crypto mining businesses

A commercial miner engages in mining as part of large-scale business activity. You’re in the commercial mining industry if you’ve invested thousands of dollars in equipment and operate from a dedicated location, such as a data centre. You may also be a commercial miner if you sell them frequently for a quick profit instead of amassing the rewarded coins. There are many murky areas in tax law, and there is no clear cut boundary between hobby and commercial mining.

If you’re a commercial miner, this is how you’ll be taxed under ATO guidelines:

  • The sale of any rewarded coins is business income
  • The cost of equipment is a tax deduction in accordance with depreciation rules
  • Running costs can be a tax deduction to offset your taxable income
  • All profit is 100% tax assessable
  • All losses are 100% tax-deductible
  • You will probably have GST rules to follow

Speak to cryptocurrency traders and miners accountants today.

Common questions

If I just buy and hold and don’t go to Fiat do I still have to pay tax on the gains?

Unless you have traded between different coins as well, so, for example, if I buy Bitcoin to send over on Coinbase and then sell it at a higher price later down the line when things are more volatile- people might not realize what their original cost was because of all these fluctuations in prices over time (plus there’s always fees).

Do I pay tax on profits when mining crypto?

The tax on cryptocurrency mining is the same as any other type of capital gains. You will be taxed when you sell your mined coins for fiat currency, such as Australian dollars (AUD).

Get your accountancy done with a smile

Free 15 minute consultation with an accountant to discuss your business’s circumstances.

    9826 6000
    Level 2 18/25 Claremont St
    South Yarra Victoria 3141

    The Ingrams Accounting process

    Contact Us

    Get in touch if you’re ready to have a better relationship with your business’s numbers. It doesn’t matter if you are small, medium-sized, a large enterprise, or in between. We can help you no matter how easy or complex your business is. Speak to cryptocurrency traders and miners accountants today.

    15 Minute Consultation

    We want to know a bit about where your numbers are, but more than that, we want to ask questions about what makes your business tick and what we can do to make it even greater. Speak to cryptocurrency traders and miners accountants today.

    Number Crunching & Reporting

    Sure we’ll prepare your tax return and lodge it on your behalf, but more than that, we’ll prepare the reports that will inform strategic decisions and get you on track with good number management. Speak to cryptocurrency traders and miners accountants today.

    Implementing Processes & Education

    After reviewing the number data, we move on to the education on simplifying good numbers towards doing great things for you and your people. Speak to cryptocurrency traders and miners accountants today.

    Our memberships