Cryptocurrency and Australian Businesses

Just when you thought the Australian tax system couldn’t get any “simpler”, cryptocurrency arrives to stir things up. This page seeks to break things down for Australian business operators in relation to cryptocurrency.

Merchants

There are typically two outcomes when a business accepts cryptocurrency for payment of invoices:

1. Immediately converts to AUD

If you’re a business who has partnered with a cryptocurrency payment processor, then you may have chosen to allow customers to pay your bills in cryptocurrency but have AUD deposited to your bank account. The payment processor is immediately converting the cryptocurrency to AUD for you. This is the far simpler approach for Australian tax purposes as it pretty much means business as usual – book the AUD bank deposit as income, pay tax and GST where applicable.

2. Keep the crypto

Some businesses choose to keep the cryptocurrency from the sale, rather than immediately convert to AUD. As a result, the cryptocurrency held by the business typically becomes trading stock with tax implications arising on later disposal by recognising profits or losses. This makes the situation a little more complex and you really must keep good records.

For a more detailed explanation see: What are Australian tax issues for a business accepting cryptocurrency?

Startups

Innovative businesses and entrepreneurs are utilising blockchain technology and cryptocurrencies to revolutionise the way the world works.

If they are poorly structured they may experience a world of pain from a taxation point of view.

We don’t want to see a successful business fall over because of unnecessary tax burdens which were preventable, and so we strongly recommend seeking advice early in the business establishment phase to avoid problems down the road.

Tax Concessions & Incentives

The Australian tax system includes a multitude of tax concessions for businesses, particularly those which are innovative. Some of these even include the government giving you money (that’s a nice change). Other concessions help reduce tax as you operate and there are some which can help you save thousands, if not millions, when it comes time to sell the business. What’s really important to realise is that almost all will require you to have a certain structure in place from the beginning, so you better seek specialist tax advice early.

Employment & Contractor Issues

There is quite a lot to look at when it comes to working out the tax implications for businesses paying their employees and/or contractors with cryptocurrency. First you need to work out whether you are paying an employee or a contractor. Then are they in Australia or overseas?

Employers

We need to consider income tax, GST, fringe benefits tax and the valuation of the cryptocurrency, particularly if it’s an unlisted token of the employer.

For a more detailed explanation see: What are Australian tax issues for a business paying salaries with cryptocurrency?

Employees receiving cryptocurrency

If you’re the person receiving cryptocurrency for your services, then to work out the tax implications we need to know whether you are an employee or contractor and whether your employer is in Australia or overseas?

For a more detailed explanation see: What are Australian tax issues for receiving cryptocurrency as part of a salary?