The Australian Tax Office (ATO) has made it known that this year they will be paying closer attention to the cryptocurrency and non-fungible tokens (NFTs) space. In fact, it is in the news that the ATO intends to write over 400,000 warning letters to investors and traders who are involved in some forms of cryptocurrency trading in the country. So it is important that you know the differences between being an investor or a trader.

Here, we have broken down the differences between traders and investors, as far as cryptocurrency is concerned, and based on the Australian Tax Office’s guidelines.

Investor

Cryptocurrency investors are typically those who buy cryptocurrencies of their choice and store them either cold or hot to resell them in a long time to make a profit. Both institutional and retail investors fall into this category. 

Trader

You are a cryptocurrency trader if you are trading cryptocurrencies or mining the same in what the Australian Tax Office described as “an organised business.” The following signs show that you are a cryptocurrency trader:

• You have a significant capital investment.
• You’re engaged in large volumes of trades daily, weekly, or fortnightly. 
• You buy cryptocurrency assets today and sell them in a short period to make a profit. 

If you are not sure which category you fall into, you can reach out to tax professionals to help you clear your stand.

Can you be both a trader and an investor? 

Of course, you can be both a trader and investor depending on the situation or scenario surrounding your use of cryptocurrencies. For example, someone that owns a crypto mining rig may also be interested in buying certain cryptocurrencies and leaving them to grow in their personal wallets. This category of person is said to be both a trader and an investor. In this situation, tye person needs to report all their transactions involving both their trading activity and investing activities. If you are confused on what to do, you can reach out to us and we will give you the necessary heads-up on how to report your crypto tax return.