Taxpayers who invest into crypto should be wondering if they are considered a crypto investor or crypto trader and the difference between the two.
Investor: Typically buy, sell or swap crypto with the intention of holding it for long term growth and aim to generate returns over a long period of time.
Tax treatment:
- Crypto are assets and are subject to CGT when sold or exchanged for another crypto
- Capital losses can offset capital gains
- Eligible for the 12-month discount when crypto was held for more than 12 months
Trader: Typically intents to buy and sell crypto for short term profits
Carries on a business:
- Plans when to buy and sell
- Keeps extensive records
- Trade repeatedly and in volume
- Invest significant capital
- Has a separate office space
Tax treatment:
- Crypto is treated like trading stock
- Profits are treated as ordinary income and should be reported in the tax return. This includes any gains from the sales and any trading fees/ commissions incurred
- Losses are treated as deductible expenses
- Not eligible for the 12-month discount when crypto was held for more than 12 months
If you have crypto and need guidance on this matter, please contact our office at 03 9973 5905.