A Crypto tax Specialist Warns P2E Gamers May be Accumulating a Heavy Tax Bill
A Crypto tax Specialist Warns P2E Gamers May be Accumulating a Heavy Tax Bill.
Adam Saville-Brown, the regional head of Koinly, a tax software company, told Cointelegraph during last week’s Australian Crypto Convention that similar to crypto trading and investing, earnings from play-to-earn (P2E) games can be subject to tax consequences.
Crypto May Trigger Complicated Tax Situation
Play-to-earn blockchain games with in-game tokens that can be traded on exchanges and have real-world value are particularly prone to this.
“Parents were once worried about their kids’ playing games like GTA, with violence […] but parents now need to be aware of a whole new level […] tax complexities,” said Saville-Brown.
Saville-Brown added that he was approached by a father of a nine-year-old son during the convention; the father was concerned that his boy was “making bank” from P2E games.
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“The nine-year-old kid…is mining, staking, creating Youtube and TikTok videos to the point that his dad had to bring him here today because he’s generating so much income,” said him.
The Complexity of P2E Gamers Earnings
In Australia, the treatment of P2E game earnings can be complex.
According to Koinly’s Head of Tax Danny Talwar, one could face a “complicated” tax situation if they play games to earn income in Australia since they are considered as “running a business”.
“If you’re a professional gamer, it’s possible that you’re running a business, so you’d be treated under such rules.” Additionally, gamers could either be “investing” or “trading” in these games.
The Australian Taxation Office states that investors are subject to capital gains when they sell their assets, while traders are considered to be “trading stock in a business,” and therefore any profits are ordinary income.
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Meanwhile, if users have “intentions to actually run as a business […] and have a business strategy,” then it will be considered as a business for tax purposes, added Talwar.
He also said that the example of a game that can receive business treatment for tax purposes is Axie Infinity since “ people use that game to earn an income.”
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