Are You a Crypto Investor or Crypto Trader?

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Wesley Bothma
Are You A Crypto Investor Or Crypto Trader

Those who invest a significant amount of money into crypto or do a significant number of crypto trades might be asking themselves if they are considered a crypto trader or crypto investor, and what difference does this make from a tax perspective?

Read more from our in-house crypto expert at Crest Accountants to learn the difference between a crypto investor and crypto trader.

Understanding crypto investing and trading

There’s no one size fits all approach to answering whether you’re a crypto trader or crypto investor.

However, the ATO has provided the following factors to provide guidance to determine if you are a crypto trader:

  • Significant capital investment made
  • A focus on short-term trades versus making only long-term trades
  • High volume, repetitive and regular transactions taking place on a recurring basis
  • Operating in a business-like manner i.e., business planning, budgeting, etc.

If you satisfy most or all of the above, then this may weigh more heavily in the determination that you are operating as a cryptocurrency trader. Determining that you are a crypto trader is the same as determining whether your activities are considered to be carrying on a business for tax purposes.

Tax treatment differences

With this understanding of whether you are considered a crypto investor or a crypto trader, what tax treatment difference does this make? Below are the tax treatments differences between crypto investors and traders.

Tax treatment differences for crypto investors:

  • Your crypto are assets and subject to Capital Gains Tax (CGT) when you sell them
  • Your costs are accounted for at the time you sell your crypto
  • If you have a capital loss you can use it to offset capital gains
  • You may be eligible for the 12-month CGT discount when you hold the crypto for more than 12 months and sell.

Tax treatment differences for crypto traders:

  • Your crypto is treated like trading stock in a business
  • Gains are treated as ordinary income
  • Losses and costs are treated as deductible expenses subject to the business loss rules in the year they are incurred
  • You’re not eligible for the 12-month CGT discount for holding the crypto for longer than 12 months after sale.

 

If you’re still unsure if your crypto activities fall under investing or trading, it’s recommended to seek the advice from crypto tax services from a Gold Coast Accountant you can trust.

You can discover our other articles on crypto tax, such as reducing crypto tax and common misconceptions of crypto tax, here.

Crest will ensure you fully understand the benefits and risks of trading and investing, your tax obligations and of course, whether you’re a crypto investor or trader.

Contact Crest Accountants today and find out how our in-house crypto guru division can help you stay compliant while maximising your crypto use strategies.

 

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.

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Article Written & Reviewed By:

Picture of Wesley Bothma

Wesley Bothma
Wesley is a chartered accountant with over 18 years of experience in commercial accounting, international business, and e-commerce. He specializes in GST, accounting, and income tax for property developers, construction, and manufacturing businesses.Wesley writes & reviews a number of articles for Crest Accountants to help support small and medium businesses. He holds a Bachelor of Business degree and is a member of the Institute of Chartered Accountants in Australia. When not working, Wesley enjoys supporting various charities and his favorite rugby team, the Springboks.
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