Assesable income from profit-making undertaking

[#1]

If I put $10,000 into cryptocurrency and I make another $10,000, is the $10,000 of profits assesable income when I withdraw it? (if it is from a profit-making undertaking)

Initial investment (amount in): $10,000

Profits: $10,000

Amount WIthdrawn (amount out): $20,000

Expected assesable income: $20,000 - $10,000 = $10,000

If I then put $5000 back in after withdrawing the $20,000, is the assesable income now only $5000? As the total amount in is $15,000 and the total amount out is $20,000.

Expected assesable income: $20,000 - $10,000 - $5,000 = $5,000

[#2 · Accepted solution]

The first bit I think is about ordinary Income and accruals v cash and I haven’t looked into that yet. Certainly though if you convert it to cash you will have already or will at that point pay tax.

But the second bit, the $5k will be treated the same as the original $10k. Otherwise everyone would just buy things in June that hold their value past June 30 up to the value of their profit to avoid tax?

End of year: Tax on $10. Own $5k.

That’s the way I see it but no expert.

This moves on I think to the story on Deductions. This is a little more defined in the Act than the Ordinary Income side:

http://www8.austlii.edu.au/cgi-bin/viewdoc/au/legis/cth/consol_act/itaa1997240/s8.1.html

[#3]

A profit or loss is made when you realise it and in this case it is when you sell your bitcoin and withdraw it.

The re-investment of $5,000 is simply another capital injection just like when you purchased the first lot of $10,000 and is not deductible from any profit you may have made on your first transaction.

think of it as similar to share trading.