Crypto is a new and exciting investment opportunity. But it can also be confusing and complicated. That’s why having a professional accountant specializing in crypto is crucial to help you navigate the waters. Without an advisor, you could easily make costly mistakes that cost you dearly.
What is a crypto, and how does it work
Crypto is a digital currency that uses cryptography to secure transactions and control the creation of new units. It mostly is decentralized, and not subject to government or financial institution control.
Crypto are created through a process called mining. Miners are rewarded with crypto for verifying transactions on the blockchain. Those transactions are verified by computers solving complex mathematical problems.
Bitcoin, the first and most well-known crypto, was created in 2009. Since then, thousands of other crypto have been launched. Crypto is becoming increasingly popular as an investment opportunity. It is also a risky investment. It is essential to do your homework and understand how Crypto work before investing in them.
Australian taxation of Crypto
Crypto are subject to Australian income tax and capital gains tax. This means you have to declare any profits or losses from Crypto transactions on your tax return.
However, you may also be subject to Australian income tax if you receive Crypto as payment for your goods or services. The amount of income tax you will pay will depend on the value of the Crypto when they were received.
If you hold Crypto as an investment, any profits or losses from selling them will be subject to capital gains tax. Capital gains tax is calculated using the ‘capital gains method.’ It considers the crypto’s purchase and sale price. If the crypto were held for more than 12 months, the profits would be taxed at 50%. If it were held for less than 12 months, the gains would be taxed at your marginal tax rate.
GST is payable on supplies of Crypto that are made in Australia. Those include:
-selling Crypto
-exchanging Crypto for other goods or services
-gifting Crypto
-using your crypto to buy real a property
-mining Crypto
You will not have to pay GST on crypto you acquire as payment for goods or services.
The risks of investing in crypto
Crypto is a high-risk investment. Their prices are volatile and can go up or down quickly. They are also subject to hacking and fraud. You should only invest money that you can afford to lose.
Before investing in crypto, you should understand the risks involved. Some of the risks include:
-Volatility: The price of crypto is highly volatile and can go up or down quickly. This makes it a risky investment.
-Hacking and fraud: Crypto exchanges have been hacked in the past,
The benefits of using a Crypto tax accountant
There are several benefits of using a crypto tax accountant. Some of the benefits include:
-Tax planning. An accountant specializing in crypto can help you plan your tax affairs and minimize your tax liability.
-Reduce your risk. An accountant can help you understand the risks involved in investing in crypto. He helps you make informed investment decisions.
-Added security. A Crypto accountant can help you protect your Crypto from theft and fraud.
There are several other benefits of using a Crypto accountant. Some of those benefits include:
-Reduced stress: Tax season can be stressful. Having an accountant who specializes in crypto can take the stress out of tax season.
-Efficient filing: An accountant can help you file your taxes efficiently and accurately. This can save you time and money.
-Better understanding of crypto: A Crypto accountant can help you understand how crypto works and can help you make informed investment decisions.
How to find a good Crypto accountant
When looking for a Crypto accountant, it is vital to choose someone who is reputable. And has experience in the field. Ask your friends and family for recommendations. Do a Google search for Crypto accountants in your area.
Once you have a few names, check their websites to see if they offer any of the following services:
-Tax planning
-Investment advice
-Asset protection
-Hacking and fraud protection
Once you have found an accountant who meets your needs, set up a meeting to discuss your tax situation. You may ask any questions about crypto.
What to expect from your accountant
When you meet with your crypto tax accountant, they will likely ask you a few questions about your tax situation and investment goals. They will then advise you on how to declare your Crypto income and investments best.
Your accountant may also recommend that you set up a self-managed superannuation fund (SMSF) to hold your Crypto investments. An SMSF allows you to manage your retirement savings and can be a tax-effective way to invest in Crypto.
Questions to ask your accountant
Do you have experience in Crypto accounting?
What services do you offer?
What is your fee structure?
Can you provide me with a case study or client reference?
How will you protect my investments from hacking and fraud?
Can you help me set up a self-managed superannuation fund (SMSF)?
What is the best way to invest in crypto?
What are the different types of crypto?
How do I buy crypto?
What is a digital wallet?
How do I store my crypto?
What is a blockchain?
What is mining?
Can I use Crypto to pay for goods and services?
Closing thoughts
Crypto are high-risk investments. They should only be invested if you can afford to lose the money. However, there are several benefits to using a crypto accountant. These include tax planning, reducing your risk, and protecting your investments from theft and fraud.
When choosing a Crypto accountant, it is essential to make sure they are reputable and have experience in the field. Ask your friends and family for recommendations, or do a Google search for Crypto accountants in your area.
Once you have found an accountant who meets your needs, set up a meeting to discuss your tax situation and ask any questions you have about Crypto.
