P2E gamers and minors are not safe for tax collectors, says Koinly

Modern parents will need to pay closer attention to their children’s gaming habits, as some of them may be racking up huge tax bills, according to a crypto tax expert.

Adam Saville-Brown, regional head of tax software company Koinly, told Cointelegraph at last week’s Crypto Australia Conference that many people don’t realize that earnings from play-to-earn (P2E) games could be subject to the same tax consequences as cryptocurrency transactions and investment methods.

This is especially true for “play and earn” blockchain games that offer in-game tokens that are tradable on exchanges and therefore have real financial value.

“Parents used to worry about their kids playing games like GTA with violence […] But parents now need to be aware of a whole new level […] Tax complexity. “

During the convention, Saville-Brown said he was approached by the father of a 9-year-old son worried about his son “Doing Banking” from P2E Games.

“This 9-year-old… is mining, staking, making Youtube and TikTok videos to the point that his father had to bring him here today because he generates so much income,” Saville-Brown told Cointelegraph .

However, the processing of P2E gaming revenue – at least in Australia – can be complicated.

Koinly’s head of tax, Danny Talwar, explained that in Australia, if a person played games to earn income – they were considered “running a business” and could face a “complex” tax situation, noting:

“If you’re a professional gamer, you’re probably running a business, so you’re treated by rules like that.”

This is more complicated because gamers may “play these games as investors” or “play these games as traders”.

According to the Australian Taxation Office, Investors are affected by capital gains When they sell assets, traders doing the same will be considered “trading stocks”, so any profits will be considered ordinary income.

Talwar added that if the user “intends to really operate as a business” […] and have a business strategy”, then it will be considered a business for tax purposes.

He brought up the popular P2E game Axie Infinity as an example of a game that might receive commercial treatment for tax purposes”Because people use the game to earn money. “

Tax experts advise, “If there is no guidance on how to look at it from a tax perspective, everything can become very complicated.”

He added that once you “plus under-18s” playing games to earn revenue and “create in-game value, there’s a market and there are taxable consequences for doing so, and people don’t necessarily Realize that.”

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A similar situation could play out in the United States. U.S. law firm Artav at Law said the complication arises because not “all P2E benefits” are the same.

There is a grey area that “what (and how) the game pays the player determines the type of tax a particular player will owe. […] Is the income in the form of NFTs? Token? Pledge income? airdrop? “

Whether called tokens, cryptocurrencies or virtual currencies, native tokens are taxed like intangible property and are subject to capital gains tax, the US law firm said, which the IRS holds ” unanimous position” this has been since at least 2014. “

However, if you earn crypto tokens “as part of a game to earn money, the value of that crypto currency will be taxed as ordinary income,” it said.