Most helpful replyATO Certified Response
Author: BlakeATO(Community Support)Community Support ATO Certified Response9 Feb 2022
Hi @jellybeans
If you've been an investor in crypto, you'll have a capital gains event for the crypto you've been holding up until that point. This is because until that point, you would have been investing in crypto and not using it to acquire other assets (forex) instead.
If you use crypto to acquire forex, it can't be a personal use asset, even if you have to use the crypto to obtain the forex. If you're trading in forex, you're running a business, and no CGT assets can be for personal use when used for profit-making or a business. This means that you'd still be liable for CGT on the crypto you'd use in your forex trading.
In your first year of business and/or investment income, you only need to report and pay tax when you do your tax return at the end of each financial year. Eventually, you'll meet the requirements for entry into PAYG instalments. We will estimate your next year's tax based on your last return, and send you quarterly invoices to pay based on that. This stops you from getting hit by a massive bill at the end of the year. But, you can choose to register earlier for PAYG instalments. It promotes great budgeting and allows you to chip away at your tax liability in more manageable chunks.
If you establish a trust and distribute the trust earnings to yourself, you'll still be paying the same tax as a sole trader. Whether income is earned as a business or passive investment, the tax rate stays the same. The only exception to these is for companies, which unlike other entities, can retain their earnings, and are taxed differently depending on if they are a base rate entity.
You can read about crypto, forex, and PAYG instalments on our website.
Thank you for this information and additional links for more info. I’m still confused and haven’t yet started.
i haven’t started as yet and from what you have said I will be seen as a business and not personal use ? Does this mean I have to start a company name etc ? How much tax do you pay on crypto and forex ? I’m not wanting to start this until I understand the tax rates and if it’s all worth it :)
is there a set tax amount for trading ?
Author: BlakeATO(Community Support)Community Support 13 Feb 2022
Hi @jellybeans
Personal use assets are exempt from CGT. For crypto, this means buying the crypto and then quickly disposing of it in order to buy things you can't get with FIAT currency. Your crypto won't be seen as that, since you've been holding it for investment purposes until this point. The crypto will be liable for capital gains.
If you're trading forex, you're running a business for that. You don't need to register as a company - you can choose to be a sole trader, partnership, or trust, too.
Your tax rate doesn't depend on the type of income you receive - it depends on your level of income only. It's just that capital gains are calculated differently than other types of income. They still have the same end result (apart from the CGT discount if you hold the crypto for more than 12 months). This is because, for capital gains, you don't claim deductions as you incur expenses for the crypto. You only reduce your total gain by the costs you incurred once you sell the crypto.
There's no different tax rate for the types of income you receive. Companies (as opposed to other entity types) have a different tax rate on retained earnings. All other entity types distribute their earnings to the individual and are taxed at the individual rate.
Crypto and forex are complicated topics. Before investing a large amount into either, it's a good idea to get professional advice to help work out the right setup for the business you intend to have.
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