Whether you are a crypto trader or investor, you most likely have the task of…
Businesses Accepting Crypto — Tax Implications
If you’re considering accepting cryptocurrency payments at your business, this guide will help you to understand important crypto payment tax rules & practical implications.
Crypto adoption is accelerating rapidly with more & more Australian businesses accepting cryptocurrency as a payment method. Accepting crypto can expand your customer base and draw new customers. What are the tax implications of accepting cryptocurrency at an Australian business though?
Cryptocurrency payments are extremely simple. There are three different methods that can be used to accept cryptocurrency as a payment method at your business. This article will assess the tax implications of accepting cryptocurrency through these methods.
Using an Existing Wallet Solution to accept Payment
Setting up a cryptocurrency wallet and using it to accept payments is the fastest and easiest way of accepting crypto payments at a business. There are hundreds of different wallet solutions available today, most of which provide users with a simple QR code that can be scanned to send payments.
Incorporating a simple wallet solution into a business is a simple “DIY” solution to accepting cryptocurrency payments. A generic wallet, however, will not integrate into POS systems, and may not easily track payments for accounting purposes.
Simple wallet solutions may also present a custodial risk — cryptocurrency allows users to “be their own bank,” but requires a technical understanding of accepting and sending cryptocurrency payments.
Tax on Income received as Cryptocurrency
When recording customer payments made via cryptocurrency, a business will need to book sales in AUD and log a corresponding entry for the acquisition of cryptocurrency. The cryptocurrency gained through this method is considered as trading stock.
When this cryptocurrency is disposed of, the sale must be recorded as a sale in AUD, which establishes a profit or loss. The disposal of cryptocurrency captured via business sales is likely to incur GST obligations — involving additional reporting and compliance requirements.
Utilising cointracking.info and importing monthly journals into Xero is sufficient enough for most businesses regarding the accounting platforms.
Partner with a Crypto Payment Processor and Convert to AUD Instantly
There are a number of cryptocurrency payment processors (such as LivenPay) that allow businesses to capture payments in cryptocurrency and instantly convert it to AUD. These processors provide businesses with wallets, infrastructure (if necessary), payment monitoring, and conversion rates.
In this case, the business partnered with the payment processor does not capture cryptocurrency at any point, and thus is not subject to any additional tax obligations outside of normal AUD payment acceptance requirements.
Partner with a Crypto Payment Processor and accumulate cryptocurrency
Businesses may choose to partner with a cryptocurrency payment processor but retain captured cryptocurrency instead of instantly converting it to AUD. In this case, the processor typically transfers captured cryptocurrency to a separate wallet held by this business.
In this case, cryptocurrency disposal is subject to the same tax obligations outlined in section one of this guide.
Accepting cryptocurrency can expand the payment options available to a business. Fullstack’s cryptocurrency accountants assist businesses in creating tax-effective cryptocurrency payment acceptance strategies with simple & clear guidance. If you are considering accepting cryptocurrency at your business, reach out to Fullstack today.
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Stuart Reynolds is the founder of Fullstack Advisory, an award-winning accounting firm for businesses leading the future. He is a 3rd generation accountant who specialises in tech companies, agencies and entrepreneurs.