Another key tax concept when it comes to crypto, is your profit or what you earn on a revenue basis, a capital basis, or a capital account? 

Money you receive is treated either as revenue account, or ordinary income.

In terms of Revenue account:
  • Normal ‘business’ income – If you run a business, this is
    what we do day-in day-out, and what we look after.
  • Trading income – If you’re doing trading, including bots, where your  punching out transactions, that is on a revenue account, that’s not capital gain.
  • Mining income – In a way of profit intention where you buy assets, graphics cards, and asset minors. And your intention is to earn a profit from offering your computer resources to the cryptocurrency world.
  • Income from staking – The idea of staking is almost like earning interest on your value of your cryptocurrency. That is also on a revenue account, and with revenue.
  • Your tax is paid on the income, less the expenses to derive that income – So there’s no discounts on that. 

What happens if you do a mix of them, do you trade or hold? 

You can treat different portfolios separately, where you’ve got sort of a trading portion of it, and you’ve also got your long term holds as well. 

In terms of Capital account:
  • HODLing (hold on for dear life) – Buying and holding for the long-term. That is on the capital account and it’s a different set of rules that you are taxed on.
  • If your intention is to profit over time on an eventual sale.
  • You’re allowed a discount on gain if it’s held over 12 months.

    For individuals – If you’ve got a portfolio in your own name, and you fall under this capital account, and you’ve held your investments for more than 12 months, then you are entitled to a 50% discount on your sale of those assets.
  • The tax is paid on the sale value, less the cost base, adjusted for any discounts.
 
Want to learn and watch more about cryptocurrency tax? 
 
Watch Video: Tax Rules For Business Structures

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