Goal of a Trader and Miner
The goal of a trader is the frequent buying and selling of investment instruments with a goal of generating returns that outperform buy-and-hold investing.
If you are mining cryptocurrencies, any profit you make should be included in your assessable income. This is on the basis that the ATO considers you to be carrying on a business.
Although both investors and traders are seeking profits through market participation, generally investors seek larger returns over an extended period via buying and holding investments whereas traders take advantage of both rising and falling markets to enter/exit positions over a shorter timeframe.
Tax Treatment of a Trader
When you are in the business of trading/mining of cryptocurrencies, any income you derive from the transfer or disposal of that asset is assessable income. Any expenses incurred in respect to those activities would be an allowable deduction, including the initial purchase of the cryptocurrency. Cryptocurrencies held by a taxpayer carrying on a business will be considered trading stock.
For individual taxpayers, any profits are added to other income for the financial year and taxed at the individuals margin tax bracket. Losses are subtracted from other income for the financial year and reduces the individual’s personal income tax.
For companies, any profits are added to other income for the financial year and taxed at the company tax rate of 27.5%. Losses are subtracted from other income for the financial year. If no other income losses carried forward to future years.
For discretionary trusts, any profits are added to other income for the financial year and distributed in accordance with Trustee instructions.
For fixed trusts, any profits are added to other income for the financial year and distributed in accordance with unitholding.
For Self-Managed Super Funds, any profits are added to other income for the financial year and taxed at 15%.