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Business Value Creation

Crypto Investor vs. Trader: What Tax Obligations Do You Have?

Most people who buy and sell cryptocurrency fall under the official classification of an investor, even if they buy and sell often. This means your crypto is subject to Capital Gains Tax (CGT), which can result in hefty obligations. If you want to reduce your tax obligations, you’ll need to be able to classify yourself as a trader.

Of course, calling yourself a trader isn’t enough. The ATO is cracking down on investors who are attempting to minimize their cryptocurrency tax obligations by misclassifying themselves, whether accidentally or intentionally. 

Here’s a look at how the ATO distinguishes between cryptocurrency investors and traders, along with the requirements you need to meet to prove you’re conducting cryptocurrency trading as a legitimate business activity.  

What Is a Cryptocurrency Investor? 

Most Australians that buy and sell cryptocurrency fall under the “investor” classification. These investors may buy and hold for the long-term or they may sell or swap cryptocurrency regularly. In any case, an investor is focused on long-term capital growth. While most cryptocurrency holders in Australia are classified as investors, this is less than ideal.

As an investor, you will be subject to capital gains tax (CGT) rules, which means you’ll have to pay taxes on any gains you make when you sell your cryptocurrency. For instance, if you buy $500 in crypto and sell it for $700 later in the year, you may owe capital gains tax on the $200 profit. You might be able to deduct transaction fees from the profit, but the proceeds will be taxable.

Some investors may qualify for a 50 per cent discount on CGT if they hold crypto for at least 12 months before selling it and it is wholly owned by a trust or individual. Crypto held by a superfund may qualify for up to a 33 per cent discount within the same timeframe. So, how much does CGT cost?

Instead of taking a percentage of your profits, you will instead add the profits to your income. As such, you may pay as much as 45 per cent on your crypto gains if you are in the top marginal tax bracket. This system makes cryptocurrency less attractive for high-income earners, especially those handling it in volume, which is why it’s important to understand if you meet the requirements to be considered a trader. 

What Is a Cryptocurrency Trader? 

There’s a long list of requirements you must meet to be considered a cryptocurrency trader for tax purposes. Starting with the definition, a cryptocurrency trader is someone who buys and sells crypto for short-term profits (compared to the long-term capital growth goal of an investor).

Additionally, a trader works with a detailed strategy that determines when they will purchase cryptocurrency and when they will sell that cryptocurrency. Traders also work in high volume, meaning they trade large amounts often and they keep a record of all of their gains/losses and transactions over time.

The Australian Tax Office will only designate you as a trader if you prove that you are “carrying on business” and not just an individual looking to turn a quick profit with your crypto transactions. This does not require substantial capital, a registered business, paid research or hired staff, although any of these elements can help you solidify your classification as a trader over an investor. 

If you do meet the requirements to be classified as a cryptocurrency trader, you will not be subject to the CGT rules. Instead, the rules of trading stock will apply. While this can save you money, it’s advisable that you understand the implications. 

How Cryptocurrency Traders Are Taxed

While cryptocurrency traders are not subject to CGT rules, they must understand the implications of the trading stock rules. In short, these rules mean:

  • Cryptocurrency traders have all profits taxed like any other income.
  • Crypto assets held at the end of the year that have shown an increase in value will realise income for tax purposes.
  • Crypto assets held at the end of the year that have shown a decrease in value will realise deductions for tax purposes.

The primary advantages of being classified as a trader are that you can take deductions on your crypto losses, you can claim related expenses for conducting your business (i.e., a percentage of your rent or mortgage) and you can use the instant write-off for relevant assets (e.g., hardware and software). 

Additionally, crypto traders may choose to do business as a company, which means your crypto traders would be taxed at the company tax rates (either 25 per cent or 30 per cent) instead of your personal tax rate, which could save you a substantial amount of money. With that said, the trading stock rules that apply to cryptocurrency traders are far more complex than we can cover here. 

Are You a Trader or an Investor?

If you currently buy and sell cryptocurrency and you’re wondering what your tax classification is and whether or not you qualify to be taxed as a trader, don’t make any guesses. Reach out to nexZen Accounting for help navigating this complicated topic and we’ll help you devise a strategy that will keep more dollars in your pocket come tax season.

Ready to take the next step? Schedule a consultation today and let our knowledgeable tax professionals answer your questions. 

Categories
Business Value Creation

Cash Flow: How to Run a Business Without Enough Money

Running a small business is often difficult. It’s much harder when you’re stressed about finances, have limited cash flow, and are struggling to juggle all your daily tasks.

In the early days of business, owners often envision success. They know that means hard work, but they expect a return for their efforts. You start work early and end work late. You’re always “on the clock” because it’s your business. There are few breaks, if any. You’re in charge of operations, management, sales, and accounting. You’re the one who sets up utilities, pays the bills, and issues paychecks.

It’s easy to get caught up in the endlessly urgent tasks and suddenly realize your cash is gone. Your bank balance isn’t enough to pay what you owe, and you have nearly nothing to show for all your efforts. Once you pay employees, there’s no cash left for GST, tax, and superannuation. There’s certainly nothing left to pay yourself. Where did all your money go?

What’s the solution? Should you close up shop and consider yourself a failure? Should you buckle down and work even harder, hoping you somehow crank out a meager existence next month?

We have a better solution. nexZen Accounting works with small businesses just like yours. In fact, we specialize in helping new business owners get their organisations up and running. Those early days are some of the most difficult for any entrepreneur. You’re absolutely not alone, and you’re not a failure. Cash flow is a common problem for new businesses, though it’s rarely discussed. We can help you create better cash flow, get ahead on your accounting tasks, and gain increased financial stability. Here’s how.

Cash Flow Reporting

Cash flow is the way money moves in and out of your business. Cash flow reports are one of the most important accounting tasks for a new business owner. They show you where your money went, where it’s going, and where it’s coming from.

Cash Flow Management

Cash flow management works hand-in-hand with cash flow reporting. In fact, cash flow reporting is just one small part of cash flow management. The report helps you see the numbers in one easy-to-read format. Cash flow management takes the task one step farther, helping you stay on top of your finances. We help you see potential problems and fix them. We also help you better manage your bills, pay your suppliers on time, and, perhaps most importantly, pay yourself.

Cash Flow Forecasting

Cash flow forecasting is another part of cash flow management. We’ll help you read and understand the cash flow report. You can predict how much cash you’ll have in the future, better manage your expenses, and know exactly where you stand financially. That’s much better than paying bills and hoping there’s a little something left over for yourself at the end of the month. Are you sick of being surprised when you run out of money? That’s why cash flow forecasting is so important. You’ll never be surprised by a “zero” bank balance again. When you know where you stand financially, you can do something about it.

Budgeting

No one likes budgeting, but it’s part of running a successful business. While a business budget is similar to a personal budget, there’s a lot more to it. We can help you identify all your sources of revenue, organize your fixed expenses and create a calendar of due dates, anticipate your variable expenses, create a savings fund for emergency expenses, and create financial reports with all of this information organized and simplified.

Actual vs. Budget Reporting

So, what happens if you spend more than your budget allows? We can tell you that, too. We will help you analyze your actual spending versus your budgeted spending. With this comparison, we can help you spot discrepancies, analyze your spending trends, and find better ways to save money. If you spent more than you earned this month, we can help you fix the problem before it gets out of hand. Our goal is to help you sleep better at night, wake up refreshed the next morning, and feel able to tackle the day with confidence.

Business Plan

If you started a business with no direction, little confidence, and plenty of dreams, you’re not alone. Many successful business owners do the same thing every day. We find that it’s much easier to properly run and manage an organisation if you have a good plan, though. With a solid business plan, you will know exactly where you’re headed and how to get there. You can also apply for loans, impress potential investors, and outline your short-term and long-term goals.

Feel Better, Sleep Better, and Be Happier with nexZen

Sometimes clients ask us why we run our company the way we do. We aren’t just accountants. We don’t just sit behind a desk all day and crunch the numbers. We genuinely care about our clients, and we want them to succeed. If your finances are in disarray, you can’t possibly know whether you’re flying or falling. If you feel like an anxious ball of nerves, that’s why.

We love to get to know our customers first. What’s your biggest concern? What would make you feel better? If you don’t know what you need, we’ll help you figure it out.

Some of our clients don’t know anything about accounting, and that’s okay. We can start at the very beginning and walk through the process together. We’re accounting experts, but we’re people-focused, too.

Other clients know exactly how to crunch the numbers, but they can’t seem to get ahead, no matter what they do. We can help with that, too. In fact, we created a guide to help boost your cash flow immediately. If you want practical, hands-on experience with business management and cash flow budgeting, nexZen is exactly what you’re looking for.

We help business owners get ahead financially and prepare for the future. Our main focus? Creating win-win strategies that give you freedom from stress and worry. Ready to get started? Book a discovery call today.

This is a loser that most people are probably pretty happy about — the government is extending a task force that targets tax avoidance by multinationals, large public and private groups, trusts and wealthy individuals.

It is giving the Australian Tax Office (ATO) more than $600 million over the next three years to keep the scrutiny on those groups.

The budget forecasts the extension of the task force will make the government $2.1 billion in revenue from tax over the next four years.

From

2022-23 income year

Normally, GST and PAYG instalment amounts are adjusted using a GDP adjustment or uplift. For the 2022-23 income year, the Government is setting this uplift factor at 2% instead of the 10% that would have applied. 

The 2% uplift rate will apply to small to medium enterprises eligible to use the relevant instalment methods for instalments for the 2022-23 income year and are due after the amending legislation comes into effect:

  • Up to $10 million annual aggregated turnover for GST instalments and 
  • $50 million annual aggregated turnover for PAYG instalments 

Get an offer now..!!

From12.01am 30 March 2022

There are a few jokes going around social media about the price of fuel.

As widely predicted, the Government will temporarily reduce the excise and excise-equivalent customs duty rate that applies to petrol and diesel by 50% for 6 months from Budget night. That is, the current 44.2 cents per litre excise rate will reduce to 22.1 cents per litre from Budget night. However, the measure is subject to the passage of the enabling legislation so don’t expect to see a change right away. 

 The reduction extends to all other fuel and petroleum based products except aviation fuels.

At the conclusion of the 6 months on 28 September 2022, the excise and excise-equivalent customs duty rates revert to previous rates including any indexation that would have applied during the 6 month period. 

The Australian Competition and Consumer Commission (ACCC) will monitor the price behaviour of retailers to ensure that the lower excise rate is passed on to consumers.

The measure comes at a cost of $5.6bn.

From

1 July 2021 to 30 June 2022

The low and middle income tax offset (LMITO) currently provides a reduction in tax of up to $1,080 for individuals with a taxable income of up to $126,000.

The tax offset is triggered when a taxpayer lodges their 2021-22 tax return.

For the 2021-22, the LMITO will be increased by $420 which means that the proposed new rates for individuals are as follows:

 

Taxable income 

Offset 

$37,000 or less 

$675

Between $37,001 and $48,000 

$675 plus 7.5 cents for every dollar above $37,000, up to a maximum of $1,500

Between $48,001 and $90,000 

$1,500

Between $90,001 and $126,000 

$1,500 minus 3 cents for every dollar of the amount above $90,000 

From

April 2022

A one-off $250 ‘cost of living payment’ will be provided to Australian resident recipients of the following payments and concession card holders:

  • Age Pension 
  • Disability Support Pension 
  • Parenting Payment 
  • Carer Payment 
  • Carer Allowance (if not in receipt of a primary income support payment) 
  • Jobseeker Payment 
  • Youth Allowance 
  • Austudy and Abstudy Living Allowance 
  • Double Orphan Pension 
  • Special Benefit 
  • Farm Household Allowance 
  • Pensioner Concession Card (PCC) holders 
  • Commonwealth Seniors Health Card holders 
  • Eligible Veterans’ Affairs payment recipients and Veteran Gold card holders.

    The payments are exempt from taxation and will not count as income support for the purposes of any income support payment. An individual can only receive one payment.

The Home Guarantee Scheme guarantees part of an eligible buyer’s home loan, enabling people to buy a home with a smaller deposit and without the need for lenders mortgage insurance. The Government has extended two existing guarantees and introduced a new regional scheme.

Just prior to the Budget, the Government announced:

  • First Home Guarantee – from 1 July 2022, an increase from 10,000 to 35,000 guarantees to support eligible first homebuyers to purchase a new or existing home. 
  • Single parent Family Home Guarantee – 5,000 guarantees each year from 1 July 2022 to 30 June 2025. The family home guarantee supports eligible single parents with children to buy their first home or to re-enter the housing market with a deposit of as little as 2%.
  • Introduction of a Regional Home Guarantee. This guarantee will support eligible citizens and permanent residents who have not owed a home for 5 years (including non-first home buyers) to purchase or construct a new home in regional areas with a minimum 5% deposit areas (subject to the passage of enabling legislation).

From

1 July 2021

The Medicare levy low income thresholds for seniors and pensioners, families and singles will increase from 1 July 2021.

 

2020-21 

2021-22 

Singles 

$23,226 

$23,365

Family threshold 

$39,167 

$39,402

Single seniors and pensioners 

$36,705 

$36,925

Family threshold for seniors and pensioners 

$51,094 

$51,401

 
For each dependent child or student, the family income thresholds increase by a further $3,619 instead of the previous amount of $3,597. 

From

1 July 2024


Trust and beneficiary income reporting and processing will be digitalised with all trusts being provided with the option of lodging income tax returns electronically.

While this measure will reduce compliance costs, it will also increase transparency and provide the ATO with a greater insight into where anomalies are occurring.

The temporary 50% reduction in superannuation minimum drawdown requirements for account-based pensions and similar products has been extended to 30 June 2023. 


Minimum superannuation drawdown rates 2019-2023

Age 

Default minimum drawdown rates (%) 

Reduced rates by 50% for the 2019-20 to 2022-23 income years (%) 

Under 65 

65-74 

2.5 

75-79 

80-84 

3.5 

85-89 

4.5 

90-94 

11 

5.5 

95 or more 

14 

 

From 7:30pm AEDT, 29 March 2022 until 30 June 2023
The Government intends to provide a 120% tax deduction for expenditure incurred by small businesses on business expenses and depreciating assets that support their digital adoption, such as portable payment devices, cyber security systems or subscriptions to cloud based services. The technology boost will be available to small business with an aggregated annual turnover of less than $50 million.An annual expenditure cap of $100,000 will apply to the boost. The boost for eligible expenditure incurred by 30 June 2022 will be claimed in tax returns for the following income year. The boost for eligible expenditure incurred between 1 July 2022 and 30 June 2023 will be included in the income year in which the expenditure is incurred. That is, the additional deduction available under this measure is expected to be claimed in the 2023 tax return.  

From

1 January 2024

As announced prior to the Budget, companies will be able to choose to have their pay as you go (PAYG) instalments calculated using current financial performance, extracted from business accounting software, with some tax adjustments. 
The move is intended to ensure that instalment liabilities are aligned to the businesses cashflow. In addition, the digitisation of PAYG instalments will improve transparency and provide more accurate data on performance. 

In bad news for people’s pay packets, real wages are not forecast to grow until later this year at the earliest thanks to higher-than-expected inflation.

At the end of last year, Treasury predicted the inflation rate would be 2.75 per cent. The reality has ended up being around 4.25 per cent.

The budget is predicting wages will only be just higher than inflation in the next couple of years, meaning cost of living pressures are unlikely to ease any time soon.

Despite current price hikes, the budget is forecasting inflation will taper off and wages will grow faster by the middle of the decade.

From

1 January 2024

As announced prior to the Budget, businesses will be able to report Taxable Payments Reporting System data via their accounting software on the same lodgment cycle as their activity statements.
The measure is expected to reduce the costs of complying with the system and increase transparency.

The measure that enables payments from certain state and territory COVID-19 business support programs to be treated as non-assessable non-exempt (NANE) income has already been extended until 30 June 2022. 
The Government has announced that the following state and territory grant programs have been made eligible for this treatment since the 2021-22 MYEFO, although it is not clear whether the relevant legislative instruments have been issued as yet:

  • New South Wales Accommodation Support Grant 
  • New South Wales Commercial Landlord Hardship Grant 
  • New South Wales Performing Arts Relaunch Package 
  • New South Wales Festival Relaunch Package 
  • New South Wales 2022 Small Business Support Program 
  • Queensland 2021 COVID 19 Business Support Grant 
  • South Australia COVID 19 Tourism and Hospitality Support Grant 
  • South Australia COVID 19 Business Hardship Grant.

    This builds on the list of existing grants paid by New South Wales and Victoria that can already qualify for NANE income treatment. 

As announced prior to the Budget, the Government will commit $6.6 million for the development of IT infrastructure that will enable the ATO to share Single Touch Payroll (STP) data with State and Territory Revenue Offices on an ongoing basis. 

The funding will be deployed following further consideration of which states and territories are able and willing to make investments in their own systems and administrative processes to pre-fill payroll tax returns with STP data in order to reduce compliance costs for businesses.

From

1 July 2022

Back in the 2019-20 Budget, the Government announced that Australian Business Number (ABN) holders would be stripped of their ABNs if they failed to lodge their income tax return. In addition, ABN holders would be required to annually confirm the accuracy of their details on the Australian Business Register.


This measure has been deferred for 12 months, which means that the tax return lodgement obligation is due to commence from 1 July 2022 with the annual confirmation of ABN details to commence from 1 July 2023.

From

1 July 2021

As previously announced, workrelated COVID19 test expenses incurred by individuals will be made tax deductible. 
Changes will also be made to ensure that FBT will not be payable by employers if they provide fringe benefits relating to COVID19 testing to their employees for workrelated purposes.
The changes for deductions will be effective from 1 July 2021, with the FBT changes to apply from 1 April 2021.
At this stage it is not entirely clear whether the deduction rules will cover expenses incurred where the employee is able to work from home. The initial media release indicates that the measure will cover situations where the individual has the option of working remotely, while the Budget only refers to costs of taking a COVID-19 test to attend a place of work but doesn’t specifically refer to employees who can work from home.

From

7:30pm AEDT, 29 March 2022 until 30 June 2024

The Government intends to provide a 120% tax deduction for expenditure incurred by small businesses on external training courses provided to employees. The deduction will be available to small business with an aggregated annual turnover of less than $50 million. External training courses will need to be provided to employees in Australia or online, and delivered by entities registered in Australia.
Some exclusions will apply, such as for in-house or on-the-job training and expenditure on external training courses for persons other than employees.
We assume there will need to be a nexus between the employee’s employment and the training program undertaken for the boost, although we are waiting on further details of this initiative to be released. 
The boost for eligible expenditure incurred by 30 June 2022 will be claimed in the tax return for the following income year (that is, the 2023 tax return). The boost for eligible expenditure incurred between 1 July 2022 and 30 June 2024, will be included in the income year in which the expenditure is incurred.

Just prior to the Federal Budget, the Government announced the extension of the:

  • Boosting Apprenticeship Commencements wage subsidy, and
  • Completing Apprenticeship Commencement wage subsidy.

    Any employer (or Group Training Organisation) who takes on an apprentice or trainee up until 30 June 2022 can gain access to:
  • 50% of the eligible Australian Apprentice’s wages in the first year, capped at a maximum payment value of $7,000 per quarter per Australian Apprentice,
  • 10% of the eligible Australian Apprentice’s wages in the second year, capped at a maximum payment value of $1,500 per quarter per Australian Apprentice, and
  • 5% of the eligible Australian Apprentice’s wages in the third year, capped at a maximum payment value of $750 per quarter per Australian Apprentice.

An additional $652.6m has been set aside to extend the ATO’s Tax Avoidance Taskforce by 2 years to 30 June 2025.
In that time, the taskforce is expected to increase receipts by $2.1bn and increase payments by $652.6m.

Buried under the wildly exciting headline of Commonwealth’s Deregulation Agenda, is the $19.9 million spend by the Australian Bureau of Statistics to develop a new reporting application to enable businesses to submit surveys on business indicators directly through their accounting software. Excellent. Real time reporting utilising verified data on the state of Australian business. Guarantee of Origin scheme, and the development of a Biodiversity Stewardship Trading Platform to support farmers to undertake biodiversity activities ahead of the introduction of a voluntary biodiversity stewardship market.

Another $148.6m is for the development of community microgrids and just over $50m to develop gas infrastructure projects.

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