Crypto currency’s, do you need to pay tax?
With the monumental rise of crypto currency, many individuals are jumping on board to try their luck.
Whilst still in it’s infancy, the tax treatment of crypto currencies are unknown by many due to the lack of intrinsic knowledge held by much of the population on the subject.
The basic rules on the matter are as follows:
Should you receive bitcoins for services rendered (or products sold), you will need to record the value of the bitcoins you have received. The market price will be deemed as the fair price one would be entitled to receive at a reputable Australian exchange.
Your business will be liable to pay GST on the goods or services traded to the same extent your business would be liable for GST if it was a cash based transaction.
Expenses incurred by your business are treated are also treated based on the fair exchange rate of the currency at a reputable Australian exchange, and GST credits are redeemable in the same manner as if it were a cash based transaction (deductible on your tax return / BAS).
Capital gains are also payable should they be incurred (however these are reduced by any components included as assessable income)(this can be calculated by your accounting firm Melbourne).
Should you salary sacrifice some of your income, (provided you have a valid salary sacrifice arrangement in place), the proceeds will be treated as a fringe benefit, should a valid salary sacrifice arrangement not be in place, normal salary and wage provisions will be in place (PAYG will need to be calculated as per usual).
Trading crypto currency’s is subject to different tax treatments entirely and would depend on whether you are deemed to be carrying on a business of investing in crypto currencies or whether the crypto currency’s are purchased for investment purposes.
In order to determine whether or not you are running a business of investing or simply holding crypto currencies for investment purposes, the following factors are taken into account:
-Volume of currency’s traded
-Value of currency’s traded
-Frequency of currency’s traded
-Duration crypto currency’s are held
-Whether you have a separate 9-5 income or if Crypto currency trading is your main source of income
-Intention of trading (ie to create a profitable business or held to make some passive income)
Should you still be unsure whether your crypto currency will be treated as a business or investment. Your local accountant Melbourne will be able to assist you.
Business related crypto currency investment will be treated in the same manner as an ordinary business (whereby you may deduct any expense incurred in running your business (currency will be treated as stock), whereas crypto currency held for investment purposes will be subject to capital gains tax in the same manner as any other cgt assessable asset.
For further clarification, please contact your local accountant south yarra.