Following its establishment in 2013, the Cryptocurrency Exchanges industry has become one of the fastest growing industry in Australia because it caters to rising interest in cryptocurrencies as a form of payment. These opportunities are expected to contribute to growth in enterprise and employee numbers over the next five years.
I have worked with Cryptocurrency businesses since they first emerged. While most businesses tend to operate at a loss for the first few years, the ATO allows small businesses operators to offset their businesses losses against their other salary income. This is very advantageous as it enables you to get a tax refund during the early Start-Up state of your business.
There are a few conditions that need to be assessed. For instance if your salary is less than $250,000 and your Cryptocurrency business income is more than $20,000 then any net business loss can be tax deductible resulting in an income tax refund.
Determining if you operating a Cryptocurrency Business can depend on a number of factors. The main one to consider are:
- Are you operating for the purpose of making a profit?
- Do you have significant and regular transactions?
- Are you keeping proper records?
- How much capital has been invested?
If you are buying Cryptocurrency with the intention of holding them long-term, then you would usually be an investor and not a business operator. This means than the net proceeds you make from the sale of the Cryptocurrency is treated as a net capital gain instead of ordinary business income.
A significant difference is that a net capital loss from investing cannot be used to offset other salary income. These net capital losses must be carried forward and offset against future capital gains only.
What To Do?
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