Unless you’ve been under a nice rock this past decade, you’ve likely heard about the success, and the volatility, of cryptocurrency. It can be a daunting prospect to dip your toe into if you haven’t followed the concept since the early days, what with its ever-changing and rapidly growing popularity, costs and risks.
Here at Accounting Tax Solutions, we provide professional and experienced tax support and guidance regarding your tax obligations of your investments in cryptocurrency and trading to ensure that you make wise and up to-date decisions based on your specific financial goals and needs. For example, you must understand your tax obligations surrounding your crypto investments, primarily as the ATO invests heavily in digital means to understand Australia’s tax payers involvement in the scene better.
But what exactly is cryptocurrency? And is it right for you?
Cryptocurrency is a term now used for the broad range of decentralised digital assets. There is generally no physical form to cryptocurrency; instead, ownership is stored in a ledger in a secure database. They technically need to meet six conditions to be recognised as cryptocurrency, with Bitcoin being the original form of cryptocurrency, first released in 2009.
As of January 2021, there were more than 4000 cryptocurrencies in existence. Many of these have little to no following, whilst others are extremely popular. We are beginning to see crypto exchanges for real estate, the recognition of cryptocurrency as legal tender and investments proving lucrative when done correctly.
Crypto trading, mining and staking are all terms given to cryptocurrency activity that one user can perform. Crypto trading refers to the buying, selling and ‘swapping/trading’ of currencies and the ability to use these ‘coins’ to purchase or trade for other assets, such as money. You need to be aware that all of these events are taxable.
Mining is a term given for solving complex mathematical problems in a blockchain, a record of transactions. The solver may be rewarded with cryptocurrency in return.
Crypto staking is another term for simply holding onto your coins, rather than trading usually in a special ‘wallet’. It can be just as profitable as trading or mining when done correctly.
If you would like to learn more on your tax obligations with cryptocurrency, our team at Accounting Tax Solutions would be more than happy to help you. Contact our office on 07 5559 1200 or fill out our contact form to get started today!