Digital Asset Trader
If you made more than a few casual trades in the cryptocurrency markets then there is a good chance that you are a digital asset trader. The typical CGT rules that you have heard about no longer apply and you may be able to take advantage of the many benefits available to you.
CategoryDigital Asset Trader
ActivitiesProfit making venture High quantity of trades Large time commitment
ImplicationsCGT rules do not apply
BenefitsVariety of techniques to reduce taxable income Claim related expenses Possible tax offsets Net loss can be offset against other income sources
You have had a successful year on the markets, everyday you wake up and check the latest news feed to see what prospects the day might bring. You watch the markets diligently, waiting for the right signal before placing your trades. You cash out before the day ends so you can rest easy at night, counting your profits from the trading day.
If this scenario sounds even somewhat familiar then there is a very good chance that you are a digital asset trader rather than an investor. Traders differ from Investors as they are in the business of earning income from their trading activities. A good sign that you might be a trader is if your activity is performed under a business entity, however an individual can still be considered a trader if you fit the right profile.
Identifying yourself as a trader has important tax implications, and it is important that you are aware of these implications while you undertake your trading activities.
- The intent of your activities is profit making.
- You place a comparatively large quantity of trades, reaching anywhere from the hundreds to the hundreds of thousands.
- Your activity is high volume and regular.
- A large part of your time is spent performing research, placing trades and monitoring outcomes.
- You use a systematic approach. Everything is well research and planned in detail, you keep detailed records and receipts of your trades.
- You have a large amount of capital invested in your venture.
Being considered a trader carries with it many of the same benefits that a business receives. A more diverse set of rules and techniques are available and can often allow for a better tax outcome. In some scenarios, especially in the 2018 financial year we have found that traders consistently achieved better tax outcomes than investors.
- Many of the benefits of being a business can be applied, even if you are an individual.
- Expenses related to your trading activity are deductable.
- Much greater degree of flexibility in how your taxable income is calculated.
- Business related tax offsets may apply.
A specialist tax accountant provides the best opportunity for both discovering and successfully applying these rules to your specific case. Intricate knowledge of the asset class involved is critical in correctly applying these rules in a manner compliant with ATO regulations.
Kova Tax are specialists in the cryptocurrency taxation and accounting space. When you work with us, you are working with an accounting firm that actually understands crypto and understands how to talk your language. We are passionate about taxation and work diligently to understand each of our clients on an individual basis. Our goal is always to ensure the best outcome for you and bring certainty to your trading activity. If you are reading this article then you undoubtedly could be benefiting from a taxation specialist. Our first consultation is no cost and no obligation, we want to hear your story.
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