P2E players, minors are no safer than tax man, says Coinley

Modern parents need to monitor their children’s gaming habits more closely.

Speaking to Cointelegraph at last week’s Australian Crypto Convention, Adam Saville-Brown, head of regional tax software company Coinly, said many don’t realize that revenue from play-to-earn (P2E) games has similar tax consequences. A way to trade and invest in crypto.

This is especially true for game-to-earn blockchain games that can be traded on game exchanges and provide in-game tokens that have real-world financial value.

“Parents were once worried about their children playing violent games like GTA. […] But parents now need to know a whole new level […] Tax Complexities”.

Saville-Brown said he was approached during the meeting by the father of a nine-year-old boy who was concerned his son was “making bank” from P2E games.

Saville-Brown told Cointelegraph: “The nine-year-old boy … is mining, uploading, creating YouTube and TikTok videos. His father had to bring him here today because he’s making a lot of money.

However, the treatment of P2E gaming revenues – at least in Australia – can be complex.

Coinley’s head of tax, Danny Talwar, said that in Australia, if a person plays games for income – they are considered a “business” and may face a “complex” tax situation.

“If you’re a professional gamer, you’re probably running a business, so you might be covered under such rules.

This is further complicated as the game allows players to either “play as an investor” or “play these games as a trader”.

According to the Australian Taxation Office, investors are subject to capital gains when they sell their assets, while traders who do the same are considered “trading shares in a business” and any gain is treated as ordinary income.

Talwar added that if users “intend to operate as a business […] And have a business strategy.” They are then treated as a business for tax purposes.

He cited the popular P2E game Axie Infinity as an example of a game that could be treated as a business for tax purposes when “people use that game to generate income.”

The tax expert advised that “without any guidance on how one should be treated from a tax perspective, it would be very complicated.”

It once said that if you “throw in the other version for under-18s” to monetize playing games and “create in-game value that people don’t necessarily realize, it has a taxable marketplace.”

Related: Which countries are the worst for crypto taxation? A new study lists the top five.

A similar situation may arise in the United States. Artav at Law, a US law firm, notes that complications arise because “not all P2E revenues” are the same.

“There is a gray area because what (and how) the game pays the player determines the type of tax a certain player pays. […] Is the income in the form of NFT? Tokens? A fundraiser? A drop of air? “

A US law firm has stated that a native token, whether called a token, cryptocurrency or virtual currency, will be taxed as an intangible asset and subject to capital gains tax. This has been the case since at least 2014.

However, if you acquire crypto tokens “as part of a play-to-earn game, such crypto value is taxable as ordinary income,” he said.