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How would I know if I qualify for a business? Is declaring myself as a business a must? What benefit

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Hello, I recently have done some research for crypto currencies as a business but the information is quite vague.

If I were to use my own investments to host crypto 'masternodes' would I qualify as a business? Would operating multiple nodes require me to be multiple businesses? Or can it be done all as one business?

Currently said 'masternodes' only provide 'staking' rewards but will offer the option to provide services in the crypto ecosystem such a hosting an orderbook to a peer to peer decentralised exchange. Would either of these options count as a business? If so can I get 'in trouble' If I don't register as a business etc.

I understand that I could potentially claim "hosting fees/costs" as a deduction. Does running a crypto currency business have any advantages/disadvantages compared to individual income? Eg. Would I have to pay more tax/less tax. Are there any other payments/fees I may not be aware of if running a business?

 

And finally how does taking profits/cashing out income work as a business? Can I do so at anytime? And is doing a tax return as a business any different compared to as an individual?

Thanks in advance.

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ATO Community Support

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Hi @SPLv100

 

Ultimately, it's self assessed.

 

As an investor (subject to CGT), most costs are only deductible when you dispose of your asset (cryptocurrency). Only the net gain is assessable income. Staking rewards are ordinary income when they become yours.

 

As a trader/business (subject to income tax), you deduct costs as you incur them, and the total sale is taxable when the sale is completed. You can run as many activities as you wish through the one business and through the one ABN - how you organise your tax affairs and a business is entirely up to you.

 

We can't tell you which is more beneficial for your tax position - this is a question you'll need to speak with a financial adviser or an accountant for, since giving financial advice is limited to those registered to do so in Australia.

 

You can read about the differences and benefits of investor vs businesses in Shareholding as investor or share trading as business?

1 REPLY 1

Most helpful response

ATO Community Support

Replies 0

Hi @SPLv100

 

Ultimately, it's self assessed.

 

As an investor (subject to CGT), most costs are only deductible when you dispose of your asset (cryptocurrency). Only the net gain is assessable income. Staking rewards are ordinary income when they become yours.

 

As a trader/business (subject to income tax), you deduct costs as you incur them, and the total sale is taxable when the sale is completed. You can run as many activities as you wish through the one business and through the one ABN - how you organise your tax affairs and a business is entirely up to you.

 

We can't tell you which is more beneficial for your tax position - this is a question you'll need to speak with a financial adviser or an accountant for, since giving financial advice is limited to those registered to do so in Australia.

 

You can read about the differences and benefits of investor vs businesses in Shareholding as investor or share trading as business?