Do you use absorption costing with cryptocurrency

 Author: Scott23(Newbie)Registered Tax Professional

10 Nov 2021

Hi Richard I note your comments about cryptocurrency trading business and the trading stock rules apply but I don t think it addresses my specific question (my fault). I understand examples of businesses that involve cryptocurrency include: - cryptocurrency trading businesses - cryptocurrency mining businesses - cryptocurrency exchange businesses (including ATMs). I further understand from your note that the deductible costs of acquiring cryptocurrency will include things like brokerage fees, transfer costs, platform costs, borrowing expenses, interest on loans and legal fees. I also expect it may also include labour costs and query if we need to absorb storage costs (but lets not worry about that for the moment). So in terms of my question if we apply sec 70-35 and we compare the value of trading stock at start and end of year (and we use costs) do we absorb the costs referred to above in the trading stock calculation. For example if we start with an opening balance of nil, we incur expenditure and no trading stock has been sold then any deduction claimed in respect of the expenditure (per sec 8-1) is offset against any amount brought to account under sec 70-35). Any expenditure not absorbed into the trading stock is claimed outright. So is the expenditure you describe above to be absorbed or it is outright deductible and (and is not required to be absorbed). If you say none of the expenditure is not absorbed then presumably you are indicating that the cost of trading stock is nil. To the extent you settle these costs with other crypto presumably market value considerations come into play - albeit i may have crypto of value but also crypto of nil cost? Does it matter the typo of crypto business?

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