Crypto trading can deliver some great results as a business in Australia. The big question is, do you qualify as a cryptocurrency trading business?
If you trade crypto regularly, you may have considered getting classification as a crypto trading business. Crypto trading businesses get some advantages. However, getting qualified as a business in cryptocurrency trading from a taxman’s perspective isn’t so easy.
This post will take you through the tax benefits you’ll get once you become a cryptocurrency trading business and the requirements you need to be classified as a business.
Do I Qualify as a Cryptocurrency Trading Business?
Several requirements are involved in operating as a crypto trading business. Operating with a high trade volume isn’t enough—cryptocurrency traders seeking to be classified as a business must operate in a business-like way.
It is hard to pin down the definition of business-like activities under the ATO regulations. If you attain the majority of the requirements on the list below, you’re likely operating a cryptocurrency trading business:
- Substantial capital investment in crypto trading.
- Conduct your operations business-like: Business-like record keeping, business registration, consistent asset selection, business planning, professional research and analysis, office space documented strategy.
- High volume, frequent, and repetitive transaction that adheres to a regular pattern weekly or daily, over a long period in a way congruent with strategic trading patterns
- Focusing your operations on short-term profit generation instead of long-term investment
Accurate Records Importance
If you try declaring your operation as a cryptocurrency trading business, ATO will likely conduct a comprehensive review of the trading. The ATO is so strict when it comes to the requirements for business classification. Therefore, you must keep accurate records.
You’ll have to defend your case when you face an ATO review. To support the case, you’ll have to keep the following records:
- Business financial records
- Business registration forms
- Elaborate research with sources
- A well-defined trading strategy
- Accurate and comprehensive work time log
- Each transaction trading record
Do I Need An ABN As A Cryptocurrency Trader?
All Australian businesses should have an active ABN number. Acquiring an active ABN number doesn’t mean you automatically fall under the cryptocurrency trading business classification.
Nevertheless, any Aussie can get a valid ABN by completing the appropriate forms. An ABN is necessary if you want to be classified as a cryptocurrency trading business.
Benefits of Cryptocurrency Trading Business
Being listed as a cryptocurrency trading business comes with the following benefits:
- Loss regulations: Non-commercial loss provision impels traders with no activity to carry forward losses. Cryptocurrency trading businesses that make more than $20,000 of trades or sales in a financial year but record a general loss can claim this as a loss against the remaining taxable revenue, enabling operators to claim the loss against income.
- Small enterprise tax concessions: The concessions change yearly, allowing small enterprise operators reduced tax rates and an offset of up to $1000.
- Reporting of trade revenue: For cryptocurrency trading businesses, sells are trading income, whereas buys are trade purchases. Closing and opening balances for the cryptocurrency held are also included in the calculation.
- Claiming expenses: you can claim every cryptocurrency and business-related expenses like office expenses, subscriptions, software, and hardware as a deduction. You can use the $30,000 small enterprise asset write-off to claim instant deductions.
Cryptocurrency Trading and GST
According to ATO, cryptocurrency sale is “input taxed sales,” which are immune from the GST registration threshold ($75,000). This implies that even if a cryptocurrency trading business has generated trades worth over $75,000 in one year, it won’t have passed the GST threshold.
Cryptocurrency Trading Business Tax Returns
As a cryptocurrency trading business, you don’t have to notify the ATO beforehand. This business can declare its expenses and income as part of the Business Schedule of the tax returns.