Edited version of private advice

Authorisation Number: 1051762426252

Date of advice: 02 October 2020

Ruling

Subject: Am I in business - cryptocurrency

Question

Are you carrying on a business of cryptocurrency trading?

Answer

Yes.

This ruling applies for the following period:

Year ended 30 June 20XX

The scheme commences on:

1 July 20XX

Relevant facts and circumstances

You have been trading cryptocurrency since XX/XX/XXXX. Your goal is to predict cryptocurrency market price fluctuations and make a profit out of price gaps.

Your cryptocurrency portfolio consists of XX different types of cryptocurrency being traded on XX exchanges.

You trade with capital of more than $XXX,XXX. The traded value is $X million per month on average. You conduct around XXX transactions per day on average.

You spend around 40 to 60 hours per week conducting trading activities, analysis and research.

You trade by performing manual transactions based on fundamental and technical analysis.

You use expert analytics (free and paid), pay for a subscription which provides you with trading analytics and use several free information resources for research.

You also use software to automatically scan and compare prices on different cryptocurrency exchanges.

You retain records of your trading history, deposits and withdrawals in AUD.

You conduct your trading activities from a dedicated room in your residence.

You earn income through your cryptocurrency trading activities. In the 20XX income year your taxable income was $XX,XXX.

You do not have any other income.

Relevant legislative provisions

Income Tax Assessment Act 1997 subsection 995-1(1)

Reasons for decision

Subsection 995-1(1) of the Income Tax Assessment Act 1997 (ITAA 1997) defines 'business' as including:

...any profession, trade, employment, vocation or calling, but does not include occupation as an employee.

There is no definition for 'carrying on a business' in either the ITAA 1997 or the Income Tax Assessment Act 1936.

Taxation Ruling TR 97/11 Income tax: am I carrying on a business of primary production? (TR 97/11) provides the Commissioner's view on the meaning of carrying on a business for primary production and outlines a number of factors developed by courts and tribunals that they have found to be indicative of when a taxpayer is carrying on a business of primary production. These indicators are also applicable to non-primary production activities:

(a)  the existence of a profit-making and commercial purpose (Walsh J in Thomas v. Federal Commissioner of Taxation (1972) ATR 165; 72 ATC 4094 held that the 'existence of a profit-making and commercial purpose' should be considered in light of the other indicia, as well as any knowledge, previous experience or skill of the taxpayer in the relevant activity);

(b)  the taxpayer has more than a mere intention to engage in business;

(c)   the existence of an intention to make a profit or a genuine belief that a profit will be made;

(d)  the size and scale of the activities;

(e)  the repetition and regularity of the activities; and

(f)    the activities are carried out in a systematic and organised (ie businesslike) manner usual for that type of business.

The above factors must be considered in light of one another, with no single factor being determinative of whether the taxpayer is engaged in carrying on a business. Even where any one factor is not present, this will not necessarily mean that a business is not carried on: Evans v. Federal Commissioner of Taxation (1989) 20 ATR 922.

Whether a business is being carried on for income tax purposes is a question of fact and degree, to be determined objectively on the specific circumstances of the case, weighing the various indicators outlined above against one another: Ferguson v. Federal Commissioner of Taxation (1979) 9 ATR 873.

In your case, the Commissioner is satisfied that you are carrying on a business of cryptocurrency trading as:

·   there is a clear profit-making and commercial purpose due to your utilisation of your knowledge, skill and experience as well as using outside resources to conduct trading activities, fundamental and technical analysis and research;

·   the steps you have taken to derive profit from your cryptocurrency trading activities indicate more than a mere intention to engage in business, instead pointing to an intention to make a profit;

·   you execute a high number of trades with many different cryptocurrencies on a regular basis and spend between 40-60 hours a week on your trading and associated activities, demonstrative a repetitive and regular pattern of high scale trading in cryptocurrency; and

·   it is considered that your activities, taken as a whole, are carried out in a businesslike manner.