Bitcoin and Airbnb have tax implications, experts warn

Bitcoin may attract more than a bit of tax. Photo / 123RF

The world is awash with the next big things in finance, such as cryptocurrency and the share economy, but experts are warning to beware the tax implications.

Bitcoin is a great example. Since 2015, more than 100,000 merchants around the world have accepted Bitcoin as payment and 2017 Cambridge University research indicated there are up to 5.8 million unique users using a cryptocurrency wallet. So how is it taxed in Australia?

Mark Chapman, director of tax communications at H & R Block said that generally, those who simply pay for goods and services in Bitcoin have no tax or GST concerns, but others may be exposed to capital gains tax (CGT).

"Transactions are exempt from CGT if Bitcoins are used to pay for goods or services for personal use, (say) hotel bookings or at a cafe," Chapman said, adding they were also exempt if used to pay for a transaction of less than A$10,000 ($11,035).

"If the cost exceeds A$10,000 the personal use exemption will not be available and CGT will apply," he said. "The capital gain is calculated as the increase in value of the Bitcoins between the time they were acquired and the time they were disposed of."

Business owners paid in Bitcoin must record it as ordinary income, in fair market value as obtained from a reputable cryptocurrency exchange; while those mining Bitcoin must declare any income they get from transferring it to a third party.

"Bitcoin held by (someone) carrying on a business of mining and selling Bitcoin is considered trading stock," Chapman said. "Any expenses incurred in respect of the mining activity are allowed as a deduction."

If someone is overseeing buying and selling of Bitcoin as an exchange service, they must declare proceeds derived from selling, but can also deduct expenses incurred in acquiring the coin for sale.

Finally, someone who invests in Bitcoin, but is not running an investment business, does not have to declare profits resulting from sales, unless the cost exceeds A$10,000.

"The capital gain is calculated as the increase in value of the Bitcoins between the time they were acquired and the time they were disposed of," Chapman said.

"If the transactions amount to a profitmaking undertaking or plan then the profits on disposal of the Bitcoin will be assessable income."

CGT is also a very real factor for another new money craze … Airbnb.

The accommodation platform can create a handy second income stream, but Omniwealth senior financial planner Maria Dyson said there are downsides, especially for those making money from the family home.

"If you use your principal place of residence for income producing activities, you may be subject to CGT when you sell, on the income producing portion of your house," Dyson said.

"Airbnb landlords (should) work with their tax agents to ensure they correctly calculate the capital gain when they use their house for Airbnb or other income earning activities in their house.

"Think again if planning to leave out the income or capital gain from your house or room renting activities. The ATO data matching technology is improving every year and is starting to match data from the sharing economy with people's tax returns."