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Cryptocurrency has delivered the opportunity for many people to explore a new way of investing and boosting their wealth.
While it is never certain what the outcome of investing in crypto will be, it is now a widely accepted practice. However, what many people don’t realise is how their success can impact their taxable income.
Here’s a quick explainer about why you need the right tax structure for your crypto investments.
Crypto responsibilities
Any earnings from cryptocurrency are absolutely taxable by the Australian government. Don’t assume that it is all under the table and the ATO has no knowledge of your crypto trading. Quite the opposite, the ATO is aware of the profits you generate and will tax you.
If you are trading in cryptocurrency, head to the ATO website and read through all your responsibilities. You might be surprised at just what the ATO expects of you.
For example, if you invest in and make money from crypto, the ATO expects you to keep records of any and all transactions for taxation purposes.
To the ATO, crypto is not a currency but an asset. The amount you will be taxed will vary depending on your situation, but crypto is considered a capital asset and so is subject to capital gains tax.
The ATO even considers it a disposal of capital if you exchange crypto for goods, cash, or even a different cryptocurrency. If you do this, you will probably be required to include a capital gain or loss in your tax return.
Add to this the fact that the ATO will treat you differently whether they consider you a crypto investor or a crypto trader. If you buy or sell in large enough amounts, you will be considered a trader and treated like a business. Income from crypto will be subject to income tax accordingly.
With this in mind, trading under your personal name is often not the best method to utilise crypto investments, especially if you are doing so at high levels.
If you already have high taxable income in your own name (e.g. above $180k), some of your income could already be taxed at 47% (including 2% medicare levy).
While you don’t want to cheat the ATO, you can still find acceptable ways to minimise your tax.
Finding the right tax structure as a crypto investor
Different tax structures could be more beneficial and more tax effective for your long-term goals.
For example, a company structure may be suitable for someone conducting crypto who is trading as a business. Doing this means you pay tax at the lower company tax rates and avoid the much higher individual marginal rates.
A trust structure may also be beneficial for long-term holding. With a trust, you can distribute your eventual gains to family members and spread the gains tax around multiple parties rather than keeping it solely under your name.
Getting your crypto tax structure right
To get the most out of your crypto trading and minimise your tax, it makes sense to seek professional help ahead of tax time.
A professional accountant can help you organise a tax structure that makes your crypto trading worthwhile and keeps more of your profits in your pocket.
Ask your Gold Coast accountant to assess your portfolio, figure out which tax structure will be best for you or your business and help you to put this structure in place.
Minimise the tax you pay on your crypto investments by speaking to a leading Gold Coast accounting team today.
Disclaimer: The information contained in this news post is general in nature and is intended to provide a general summary only and should not be relied on as a substitute for professional advice. Whilst the information is considered to be true and correct at the date of publication, changes in circumstances after the time of publication may impact upon the accuracy of the information.
