This page contains information on the tax treatment of crypto assets when they're used in business. For more information on the nature of crypto assets and the risks in using them, see ASIC’s Money Smart websiteExternal Link.
A business may hold and use crypto assets:
- in carrying on a crypto asset business (including a crypto trading, mining or exchange business or a business selling non-fungible tokens), in which case the crypto assets are treated as trading stock, and
- the cost of acquiring them is a deductible expense
- the proceeds of selling them are assessable as ordinary income
- for the purpose of exchanging goods or services in the ordinary course of carrying on a business, (including businesses that are not 'crypto asset businesses'), in which case the crypto assets are also trading stock
- as an investment, in which case the crypto assets are subject to capital gains tax (CGT) when a CGT event happens, and you need to account for them in the business's net capital gains or capital losses (see Crypto asset investments).
When you use crypto assets to buy business inputs or sell products, you may also be entitled to GST credits on purchases and may have to remit GST on sales.
Not all people using crypto assets will be carrying on a business. To be carrying on business, you will usually:
- carry on your activity for commercial reasons and in a commercially viable way
- intend to make a profit or genuinely believe you will make a profit, even if you are unlikely to do so in the short term
- undertake activities in a planned, organised and business-like manner – this may include keeping business records, preparing a business plan, and acquiring capital assets or inventory in line with your business plan
- repeat similar types of activities for your business on a regular basis.
However, the overall size of your transactions, a high volume of activity, or a level of sophistication doesn't necessarily mean you are carrying on a business using crypto assets.
If you’re still setting up or preparing to go into business, you might not yet have started the business. If you have started a business, it's important to know when you commenced it as money or property received before a business started to be carried on is not generally assessable income. Likewise, you can't claim deductions for expenses you incurred before the business was carried on.
Whether you are carrying on a business depends on your own particular circumstances. For more information, see Are you in business?
Example: business of trading crypto assets
Sachin is in the business of trading crypto assets. On 15 December 2017, he buys 1,500 Coin A for $150,000. On the same day, he sells 1,000 Coin A for $200,000.
As Sachin holds the crypto assets for sale or exchange in the ordinary course of his business, he can claim a deduction of $150,000 for the acquisition of Coin A (cost of sales).
Sachin declares income (sales) of $200,000 for the sale of Coin A.
He may also be required to value any remaining Coin A he holds as trading stock on hand at the end of the financial year. One way of determining the value of a crypto asset in Australian dollars is using a fair market value published by a reputable crypto asset exchange.End of example
Where an employee has a valid salary sacrifice arrangement with their employer to receive crypto assets as remuneration instead of Australian dollars, the payment of the crypto assets is a fringe benefit.
The benefit is a property benefit, with its value established at the time it is provided.
In the absence of a valid salary sacrifice agreement, the employee is considered to have received their normal salary or wages. In this case, the employer will need to meet their pay as you go (PAYG) withholding and superannuation obligations on the Australian dollar value of the crypto assets it pays to the employee.
For example, this would be the case is where an employee has already earned their salary or wages and then asks to be paid in crypto assets instead.
For more information on the treatment of non-cash payments to employees, see:
- Non-cash payments
- TD 2014/28 Fringe benefits tax: is the provision of bitcoin by an employer to an employee in respect of their employment a property fringe benefit for the purposes of subsection 136(1) of the Fringe Benefits Tax Assessment Act 1986?
If you receive crypto assets as payment for services provided by your business, the money value of the crypto assets is ordinary income of the business. The money value of the crypto assets is worked out at the time the income is derived.
Example: crypto assets received as payment for services
As consideration for providing legal advice to Project ICO, Dora receives 10,000 ICO tokens. The money value of the 10,000 ICO tokens is ordinary income of Dora at the time the tokens are derived.
Dora calculates the money value of the tokens as their market value, taken from a reputable exchange, at the time she derived the income.
When Dora later sells her tokens, their cost base for CGT purposes is their market value at the time she acquired them.End of example
Our crypto asset data-matching program matches what you report in your tax return with data on crypto asset transactions and accounts from designated service providers. This helps us identify the buyers and sellers of crypto assets and quantify transactions.
Irrespective of how you acquire and use crypto assets, you must keep records of each of your crypto assets and all transactions for tax purposes.How to determine the tax treatment of crypto assets (including cryptocurrency and NFTs) used in business.