Currently the ATO views mining cryptocurrency for profit as a business, just like any other business.
The revenue generated from mining by transferring the mined currency to a third party is classified as assessable income.
However because you are operating a business you are able to claim deductions related to your mining business, such as the following;
- Accounting & Financial Planning Fees that relate to your business
- Publications, subscriptions and software costs
- Home office, stationary, & a percentage of internet and telephone costs
- Seminars, training & travel expenses
- Exchange fees & charges
- Purchase costs of mining equipment
At tax time your trading income will be treated as ordinary income and included in your tax return as assessable and taxed at marginal rates. Further, any loss incurred, may be offset, subject to non commercial loss provisions, against any other assessable income to reduce your income tax liability.
However, much the same as cryptocurrency traders, you will also be required to include the value of any cryptocurrency you have "on hand" at 30 June, as assessable income, even though you haven't actually sold it.
There is also the opportunity to cash in on the small business offset, allowing you to access a potential tax saving of $1,000.
GST is payable on the supply of cryptocurrency made during the course of your mining business, and input tax credits may be available on any purchases related to carrying on your mining activities, if you are registered, or required to be registered for GST.
The Moral of the story...
Be prepared at the end of the financial year. Be smart and plan ahead, this means you will need detailed and accurate records of all your cryptocurrency transactions. You will need to convert the amount of the transaction to Australian dollars on the date of the transaction.
Many exchanges have the ability to export your transactions to an excel spreadsheet. Keeping detailed accurate records, means it will be easier for your tax professional at tax time, and reduce your compliance costs.
Remember, the ATO has highly sophisticated data matching and tracking capabilities at its disposal. It is important to make sure you are aware of your tax obligations and declare any income derived from your cryptocurrency transactions this tax season.
The material published electronically in this article is general in nature and does not constitute financial advice. We do not guarantee that the information is complete or correct. We do not accept any responsibility for loss or damage suffered by any person or body relying directly or indirectly on any information contained within this site.
We do not accept any liability for any financial decisions made on the basis of the information provided. We recommend you seek professional advice, and take into account your particular investment objectives, financial situation and individual needs before proceeding with any financial decisions.
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