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Crypto mining

How income tax and goods and services tax (GST) applies to crypto mining activities.

Last updated 17 November 2022

What is crypto mining

Crypto mining is the process of validating transactions on the blockchain and creating new blocks. The users who create new blocks in this system are known as miners.

Proof of work mining is a competition between miners to solve cryptographic puzzles and validate transactions to earn block rewards.

A miner may also join a mining pool and provide mining services to the mining pool operator. Mining pools are groups of miners who combine their computing power to increase their probability of successfully solving the cryptographic puzzle. If the pool successfully solves the puzzle, the block reward is shared with all the miners in the pool.

For more about the nature of crypto and the risks in using them, see ASIC’s MoneysmartExternal Link.

Carrying on a business in crypto mining

If you are carrying on a business in crypto mining, either by yourself or by providing services to a mining pool operator, then the crypto assets you receive from mining are treated as trading stock of your business.

All businesses must account for the value of their trading stock at the:

  • end of each income year (closing stock)
  • start of the next income year (opening stock).

Not all crypto miners will be carrying on a business and whether you are depends on your own circumstances. Determine if you are in business and the tax treatment of crypto assets you use.

GST and crypto mining

Miners carrying on an enterprise that is registered for GST, or required to be registered, will have GST consequences when mining digital currency.

Supplying mining services to a mining pool operator

If you supply mining services to a mining pool operator located in Australia, your supply will be taxable. You must pay GST on any taxable supplies you make and you may claim GST credits on eligible purchases.

The GST you remit must be in Australian currency. Find out what to do if you receive digital currency as payment.

Supplies to a non-resident

If you supply mining services to a non-resident mining pool operator who is not located in Australia, your supply will be GST-free. You do not need to pay GST on any GST-free supplies you make. However, you may be able to claim GST credits.

Start of example

Example: mining services to a non-resident mining pool

Zumi Miner Pty Ltd carries on an enterprise of providing mining services and is registered for GST.

They join a mining pool, operated by CloudMiner. CloudMiner is a non-resident and is located outside of Australia.

Zumi Miner supplies proof of work mining services to CloudMiner. CloudMiner provides Zumi Miner with CostyCoin, a digital currency, as payment for their mining services.

Zumi Miner’s supply of mining services to CloudMiner is GST-free and they will not have to pay any GST for this supply.

End of example

Claiming GST credits

You can claim GST credits for purchases related to making taxable or GST-free supplies of mining services.

You cannot claim GST credits for some purchases to the extent it is for:

  • a private or domestic purpose
  • making an input-taxed supply, such as a financial supply.
Start of example

Example: claiming GST credits relating to a taxable supply of mining services

Elise is registered for GST and makes taxable supplies of mining services to CryptoSolvers, a mining pool operated by an Australian resident in Australia.

She purchases computer equipment to assemble 4 mining rigs. These purchases include GST.

Elise sets up her mining operation in a spare room in her home. The room and mining rigs are solely used for mining. She uses an energy meter to monitor and record the energy cost of operating the 4 mining rigs.

Elise can claim:

  • GST credits for the computer equipment she purchases
  • GST credits for the energy cost to the extent that they relate to providing the mining services.
End of example

Selling digital currency received from crypto mining

If you sell digital currency you receive from providing mining services, this will be an input taxed financial supply unless it is GST-free.

Find out more about the GST treatment of the sale of digital currency.