Analyzing Taxation of Gambling and Cryptocurrency Trading Laws

This assignment explores the taxation of gambling returns and cryptocurrency trading, referencing relevant sections of the law, particularly the ITAA 1997. It addresses how gambling returns are treated when lodging corporate tax returns, emphasizing that mere windfall gains are not considered income unless the taxpayer is in the business of gambling. The assignment also discusses whether cryptocurrency trading should be treated the same as gambling returns from a taxation perspective, concluding that it should not. It highlights that while gambling gains are largely based on chance and risk, cryptocurrency trading involves different considerations, including capital gains tax and potential GST implications. The document references various sections of the ITAA 1997, such as Section 9 and Subsection 775-15 (4), to support its analysis and provides a list of references for further reading. Desklib offers this student contributed assignment along with other solved assignments and past papers.

Running head: TAXATION
Taxation
Name of the Student
Name of the University
Authors Note
Course ID

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Table of Contents
Answer to question 1..................................................................................................................2
Answer to Question 1 A:............................................................................................................2
Answer to question 1 B:.............................................................................................................2
References:.................................................................................................................................5

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Answer to question 1
Answer to Question 1 A:
Section Discussion
Section 9 According to the “Section 9 of the ITAA 1997” the income of the
taxpayers during the taxation year from the property or the business
represents the profit of the taxpayer from that business or property
during the year (Coleman, Cynthia, and Sadiq 2013). A mere windfall
gains does not possess the character of income. For example,
gambling winnings are not treated as the income unless the individual
taxpayers is carrying on the business of gambling. The gambling
returns are considered for taxation purpose under “Section 6-5 of the
ITAA 1997” as the ordinary income and it is included into the taxable
income of the taxpayer during the relevant year of derivation of such
income.
Section 12 According to the “Section 12 of the ITAA 1997” an individual
taxpayer is specifically required to include certain items while
calculating the income from business (Paul 2013). As held in
“Graham v Green (1925)” the sole means of earning livelihood for
the taxpayer was from gambling business. Arguably, there are people
that rely on the activities of gambling as the primary income source or
perform gambling business instead of indulging into the gambling as
the hobby.
Answer to question 1 B:
Is this statement correct?
State: No this statement is not correct

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Section Discussion
Subsection 775-
15 (4) of the
ITAA 1997
According to “Subsection 775-15 (4) of the ITAA 1997” on noticing
that the cost of the digital currency is lower than the $10,000 and an
individual taxpayer is using it to pay for the personal goods and
service then it is not considered for taxation purpose (Krever and
Richard 2013). On the other hand, the Australian taxation office states
that if an individual taxpayer is making use of the virtual currencies
namely the bitcoin for other purposes then the individual taxpayer
would be held liable for taxation purpose. Accordingly, if an
individual is holding digital currencies in the form of investment than
they would be required to pay the capital gains tax on any amount of
profits when they sell them.
If an individual is conducting virtual currencies trade for the purpose
of gaining profit, the profits derived from such transactions would
become the part of the taxable income (Morgan et al., 2013). An
individual taxpayer carrying on the business and makes the use of the
cryptocurrencies to pay for the goods or service or accepts as the
payment then the transactions would be considered for the taxation
purpose and would attract GST. Simultaneously, an individual
taxpayer mining bitcoins or other digital currencies and making any
profits from there on then it would be included into the taxpayer’s
taxable income. An individual taxpayer purchasing and selling
cryptocurrencies in the form of exchange services then the taxpayers
are required to pay the income tax on the profits and the transactions
would be liable for goods and service tax.
Section 9 of the
ITAA 1997
From the perspective of taxation gambling constitutes a mere windfall
gains that does not possess the character of income. “Section 9 of the
ITAA 1997” defines that winnings any amounts from gambling cannot
be classified as income unless the individual taxpayer is carrying on
the business of gambling (Woellner et al., 2013). The main argument
for implementing tax on the gambling gains is to attain equity or the
fairness. The individual taxpayer is taxed based on the ability of the
taxpayer to pay the taxes. Similarly, the bitcoin is not held as the
foreign currency.
The division 775 is not applicable and transactions that consists of the
bitcoin results in the identical tax consequences as the other barter
transactions. Accordingly, the taxpayer that obtains the payment in the
form of bitcoin for the goods and services which they provide as the
portion of the taxpayer’s business or makes the use of the bitcoin to
make business purchase, the taxpayer in this case is required to
consider the Arm’s length value of Australian dollar for the bit coin
transactions in computing the taxable income. As per the “subsection
70-10 (1) of the ITAA 1997” bitcoins that are held by the taxpayer for
carrying business of mining and selling cryptocurrencies would be
held as the trading stock (Woellner 2013). Additionally,

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cryptocurrencies that is received as the method of payment by any
business where bitcoin is held sale and exchange during the ordinary
business course is held liable for taxable purpose.
With reference to the perspective of taxation the trading of
cryptocurrencies cannot be dealt in the identical way of gambling
returns. This is because the gambling gains are most of the time purely
based on the chances with higher amount of risk is associated to losing
and any forms of gains made from there on are generally unanticipated
receipts. Arguably gains from gambling might indirectly bear another
form of taxation and consequently should not be taxed in the hands of
the gambler.

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References:
Coleman, Cynthia, and Kerrie Sadiq. 2013. Principles Of Taxation Law.
Kenny, Paul. 2013. Australian Tax 2013. Chatswood, N.S.W.: LexisNexis Butterworths.
Krever, Richard E. 2013. Australian Taxation Law Cases 2013. Pyrmont, N.S.W.: Thomson
Reuters.
Morgan, Annette, Colleen Mortimer, and Dale Pinto. 2013. A Practical Introduction To
Australian Taxation Law. North Ryde [N.S.W.]: CCH Australia.
Woellner, R. H, Stephen Barkoczy, Shirley Murphy, Chris Evans, and Dale Pinto.
2014. Australian Taxation Law Select.
Woellner, R. H. 2013. Australian Taxation Law 2012. North Ryde [N.S.W.]: CCH Australia.