Higher frequency trading - crypto as a business question

Question

BlakeATO · Accepted Answer

Yes, you can hold separate assets for your investments (under CGT) and trading (business). One big difference with running a business is that you also need to do stock take at the end of the financial year. You compare your stock (crypto) at the end of the year to the start of the year. If your stock has increased, that's assessable income, and if it has decreased, that's an allowable deduction. In your example, this means for the first year, your trading stock will increase $50,000. This means you'd add that to your assessable income for that year. You'd still be able to claim a deduction for the start-up expenses of investing that $50,000, which depreciates over five years. In the second year, the increase of $1,000 would be included in your assessable income. You need to translate (convert) the income you made at the time it is derived, using either the daily rate, or the weekly/monthly/yearly average rates. Keep in mind that if you use the average rates they must be a reasonable approximation of the result you would come to had you used the daily rates. One of the four tests for non-commercial losses is the assessable income test, which looks at the business' total turnover. For your example, that's the $50m and $5,000. Your example definitely meets the $20,000 assessable income test. You can read about valuing trading stock, costs for setting up or ceasing a business and the assessable income test on our website.

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