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Re: E-Tax Sole Trader basics: Number of Business activites*

Devotee

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Replies 7

Hi team, as a cryptocurrency trader with an ABN,
I am seeking basic help on some of the e-tax queries.

Yes I have read them in depth, but the specific lines between the three business activities confuses me.

 

Query1: Main business or professional activity
Answer1: Financial Asset Investing


Query2: Number of business activities
Answer2: 


This is where I am stuck. 

Operating, Investing, Financing. : https://www.investopedia.com/terms/b/business-activities.asp#:~:text=There%20are%20three%20main%20ty....

This all relates to cashflow statements and I don't believe this is valid for me, as i'm simply using the trading stock fields to quantify my income, also the other non-primary production business income section to quantify my sales of cryptocurrency stock out to the bank in AUD.

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Most helpful response

Taxicorn

Replies 1

@treefairy 

 

Don't over think it Smiley Very Happy

 

You only need to consider ""Net non-primary production income or loss from a business of investing"

 

This then should equal your "Net income or loss from business this year"

7 REPLIES 7

Taxicorn

Replies 3

@treefairy 

 

You only have 1 Business activity, Crypto trading.

 

What makes you believe you have 2?

Devotee

Replies 2

Well if my business is Cryptocurrency Trading, then this is me 'operating' my business, which is one.
And if the ATO only allows me to declare my main business activity as 'Financial Asset Investing', then perhaps my business activity is 'investing'.

Also this has confused me later on in the end of the business component after trading stock it asks:
"Net non-primary production income or loss from a business of investing"
"Remaining net non-primary production income or loss from business"

https://ibb.co/jWcgR3P (image shows e-tax section quoted above).

Are they considering my trading activity this sort of 'investing' or does my NET summarization of manually calculated income (crypto - aud bank) and trading stock closing stock minus expenses minus opening stock income lump into 'remaining'.

Thanks. 

Most helpful response

Taxicorn

Replies 1

@treefairy 

 

Don't over think it Smiley Very Happy

 

You only need to consider ""Net non-primary production income or loss from a business of investing"

 

This then should equal your "Net income or loss from business this year"

Devotee

Replies 0

Hi, is CFD trading a seperate business activity? Or does it all fit under the one activity of 'investing'.

ATO Community Support

Replies 2

Hi @treefairy,

 

@macfanboy is right - don't overthink it! When you think you’re overthinking it, go do something else and come back with fresh eyes and mind.

 

If you're having trouble working out your main business activity (or if you have more than one) for tax purposes, don’t stress. You’re not the only one. That’s why we have myTax instructions and a tool on having difficulty finding a main business or professional activity.

 

For you, if your business activities are CFD trading and cryptocurrency trading, then you’re going to have one business activity, and it’ll all fall under Financial Asset Investing.

 

 

Here’s how I explain the difference to people:

 

If you run a nail salon and a beauty salon, they’re similar enough businesses, right? They’re both beauty services. (A nail salon and beauty salon are probably more different than CFD trading and cryptocurrency trading are, so this is a great example!)

 

If you run a nail salon and a mechanic shop, though, they’re different business industries, areas, and have different business codes. They’re different business activities.

 

 

If you think you’re going to cut it close to the due date for your lodgment, either because your affairs are complex or you’re overthinking it (don’t worry, I do the same), you can contact us and let us know you’re going to need some extra time. We can look at giving you a deferral to help ease some of the load. Be sure to let us know before the due date, though - we can’t give a deferral if it’s past the due date.

Devotee

Replies 1

Thank you! These questions might make me seem like i'm lost a bit, but i'm just ticking boxes to double check things i'm assuming instead of knowing are correct.

The situation is a little worse than a defferal, my first year of business was backdated to encompass 2017-18, when I first bought into Cryptocurrency for the bitcoin-cash fork.

Long story short, I tried every exchange that exists and fluctuated trading mainly on one, to another, until I settled. I mean... if there is a complicated situation.. I ran into it. Hacks, being given fake replacement tokens, that then also got stolen when exchanges closed. This list is endless. Developers stealing coins. Being locked out of accounts. A record keeping nightmare.

BUT... mainly... I spent all of that months and all of that christmas holidays, learning about CGT, and then finally finding the trading stock method, which suited me as I had so many trades. I spent months trying to use coin-tracking, and quantifying every single exchanges trading history into one unified format to calculate (as every exchange had different tables and I needed to track withdrawals and deposts between them). Also trying to export ether-delta/fork-delta trade data with the only tool that existed which was third party on github and buggy, gave me no confidence I had every block swept and every trade accounted for... also... the exchanges which vanished or were closed from hacks or DDOS... left holes in my records too. I was not confident to submit if my CGT (being sequentially calculated) was wrong compared to what I actually held (which it would be if any trade or deposit/withdrawal was missing) and this is why trading stock method gave me new hope to get it all done. This ate into my study and so I put my Cryptocurrency activity on hiatus 2018-19... so I could actually do the study (BA) I was trading to help pay for.

So what i'm actually in a hurry to get right is my 2017-18 tax, so losses are carried forward properly and closing stock is done perfectly to be carried into 2018-19... then finally I can enter these two missing pieces for this year (which is ready to go). 2018-19 was a big loss (of first year profits) for me, with major exchanges being hacked, but it wasn't more than 5000$, so i'm not doing a stock-take for that middle year and there was only one sale of cryptocurrency to AUD to pay for my second semester so that is easy enough, and instead this will be reflected in my closing stock of this 2019-2020, which is healthy as I started my business up full swing after study wound down.


My main queries left are... with CFD trading loss deferred from 2017-18, and that one sale of cryptocurrency to AUD from my trading stock being income... must this immediately cancel out the deferred loss? And how do I do this? Simply by reducing the deferred loss (in the loss section) by the other business income i.e. sale of stock? Which is my only hang up for submitting 2018-19.

I did call the early engagement team in 2017-18, but I was too confused by CGT at the time to know what to ask, and I think I just asked about record keeping as it was my main concern with everything i'd faced.

Trading Stock is exactly how I felt it made sense to be handled initially so i've taken to that much easier. It makes sense that summing up everything i'm holding EOFY and where i'm holding it and its value should be taxed. Because I should pay tax on what I have, not on what I theoretically could have had. And what I have sold out to AUD makes up the rest of my income. CGT paints a very strange picture in all of the software I tried, but of course it will where it was impossible to get some exchange records. And the ability to garuntee accuracy in just copying everything across and hoping excel doesn't mess up or I don't mess up, trying to ratify every exchanges records to make sense with each other (because coin tracking had a special spreadsheet with script-active columns)... I just wasn't comfortable submitting any numbers if I had 0 faith in them. 

There is a chance some of the losses on Cryptopia are recoverable, but i'm going to find out later this year and see what the liquidators come up with, so what ever is missing from closing stock 2019-2020, might end up back on 2020-2021, if i'm lucky to get those coins back. 

To be clear though, my business was in profit 2017-18, 2018-19 has no stock-take as change is less than 5000$, and 2019-2020 my business did okay too. The losses individually I just had to take in my stride, because I still have confidence in my ability to determine scams and all the risks in this field of business, and my ability to improve from bad experiences -- and not to mention I was good enough at hedging myself, that some how I managed to survive in NET profit.

Community Support

Replies 0

Hi @treefairy

 

Following the principles of reporting business losses and the guidance we offer should help. We also talk to the treatment of loss or theft of cryptocurrency which if you have not already reviewed this may prove useful also.