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Crypto and the tax circle

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@galenkp
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I've been having some trouble sleeping lately for some reason, have found myself waking in the early hours of the morning and had trouble falling back to sleep. It's just after 3am right now and here I am again, unable to sleep. So I turned on steem.

I've been looking into some crypto-related stuff for the last hour after my curiosity was piqued by a comment from a user here in Adelaide. He'd done a test-transfer of crypto to his bank account and was surprised at how easy it was.

The thought I first had though was, how is that taxed because in my experience the process around investment, earning and profit always has the tax element - The tax-circle is complete and unavoidable for most of us. I'll be speaking with my accountant of course, however decided to have a look on the interwebs to see what I could find.

It seems crypto is treated in one of two ways here in Australia...It's either taxed as income [for business] or as an investment [for personal people]. There are certain tests to determine if a person's crypto-activity should be classed as business or personal, none of which I will go into here however typical activities that may lead to one's crypto-activities being deemed personal are:

  • Buying cryptocurrency for yourself
  • Mining crypto as a hobby
  • Casually trading cryptocurrency

I would assume that blogging for crypto would also come into the category of personal.

It seems the Australian Tax Office (ATO) classes digital-currency as property and as an asset which would mean Capital Gains Tax (CGT) is applicable.

So, if I were to make a capital gain when I disposed of some cryptocurrency I'll have to pay tax; This means if I have bought, then sold at a higher price CGT will apply to the difference in the price, the gain or profit I had made.

There are apparently discounts available if I have held the crypto currency for over 12 months of 50% on CGT and the CGT doesn't actually kick in until the asset is sold either.

The further I delved the more complex it became, but also the more clear it became and to be honest I'm not really surprised that CGT applies as I had suspected that it would right from the word go.

There are some exceptions to the taxes though. For example...

If the cryptocurrency is used to purchase services, or goods, to be used for personal use: Hotel rooms and shopping outlets that accept it
to name just a couple. There's a caveat though - That the capital gains I make are from a personal use asset acquired for less than $10,000.

Further to that, the ATO do not deem cryptocurrency as a personal use asset if it has been used as an investment, was part of a profit-making scheme, or in use as a part of business activities.

Hmm, the tax office have it stitched up it seems.

I'm not planning on converting any of my crypto into fiat at the moment however the tax implications of doing so need some investigation. I've spent almost three years here and have barely thought about the tax scenario around cryptocurrency as an income or investment - It's high-time I started to get my head around it!

Anyway, I think I'm going to have another attempt at getting some sleep tonight as I have to be up at before seven in the morning. If you happen to read this and have any thoughts to throw into the mix I'd be grateful. Of course, things will differ from country to country however there may be some similarities.

Thanks for reading if you did. Night y'all. If you comment I'll get back to you in the morning.
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