5 Best Practices for Filing your Crypto Taxes in Australia

With a tech-savvy population and a supportive regulatory environment, it comes to no surprise that 1 in 4 Australians own some form of cryptocurrency, ranking the country 4th in global crypto adoption.

As this rate of crypto ownership continues to surge, it becomes crucial to understand the complexities of crypto taxes.

In this guide, we’ll explore 5 best practices for filing your crypto taxes in Australia, equipping you with the knowledge and tools to meet your tax obligations accurately and efficiently.

By embracing these practices, you can ensure compliance and confidently navigate the world of crypto taxes with ease.

New to crypto? Start with the basics.

Keep accurate records of your entire transaction history

In the ATO’s (Australian Taxation Office’s) comprehensive crypto tax guide, which was released in 2017, they emphasised the need for individuals to keep accurate records of all cryptocurrency transactions. These records should include the following:

• Transaction Details: Record all relevant information for each crypto transaction, including the date, time, and type of transaction, as well as the value of the cryptocurrencies involved. These details will be required for calculating your cost basis, proceeds and ultimately, your capital gains & losses. Don’t forget to include any fees!

• Wallet Addresses: Unlike centralised exchanges where you are verified through KYC (know-your-customer), there’s no identification process with on-chain wallets. Therefore, it’s important for you to document all the wallet addresses that are associated with your crypto transactions, as this information is essential for verifying the ownership and authenticity of your transactions.

• Exchange Statements and Trade History: Maintain copies of your exchange statements and trade history (which usually comes in the form of CSV files or spreadsheets). These documents provide a comprehensive overview of your buying, selling, and trading activities, which is vital for accurate tax reporting.

By keeping accurate records of your entire transaction history, you not only fulfil your tax obligations but also have a clear audit trail of your crypto activities.

This documentation will assist you in identifying any missing gaps in your transaction history, which could lead to incorrect tax calculations and potentially a higher tax bill. 

Ensuring you have comprehensive records will help prevent such discrepancies, giving you peace of mind that your tax filings are accurate and minimising the risk of facing additional tax liabilities.

Use automation where possible

Now, you might have read the previous section and come to the realisation that keeping records of your entire transaction history can be a bit of a nightmare, let alone manually calculating your capital gains.

This is where leveraging crypto tax software, such as CryptoTaxCalculator, and utilising automation can come in handy.

Automating your tax calculations and reporting not only saves you valuable time and effort but also alleviates the stress often associated with filing your crypto taxes.

CryptoTaxCalculator is an Australian-made crypto tax software solution that seamlessly integrates with over 800 exchanges and wallets (including EasyCrypto!) and applies the latest tax rules & regulations released by the ATO.

This eliminates the need for manual data entry and calculations, streamlining the entire process and allowing you to download automated tax reports to send to your accountant or file directly to tax authorities.

The platform also produces a transparent audit trail of your transactions, simplifying compliance with tax regulations and providing reassurance in case of any future audits or inquiries.

As part of EasyCrypto and CryptoTaxCalculator’s partnership, we’re excited to announce that you can get 20% off your first year with CryptoTaxCalculator by using the following code at checkout: EASYCRYPTO20

Take action early: proactive vs. reactive

Taking action early and adopting a proactive approach is arguably one of the most crucial best practices when managing your crypto taxes.

Procrastination can lead to unnecessary anxiety and errors. And while starting early on your crypto taxes may be the last thing on your mind, it will give you sufficient time to gather all the necessary information, review your records, and address any discrepancies or missing details.

Being proactive also allows you to identify and address potential issues or complexities in your tax situation well in advance.

If you have a unique tax situation, this will allow you to seek professional advice early on. Also, keep in mind that tax professionals tend to get extremely busy towards tax deadlines and approaching them for help last minute may be quite costly!

Starting early gives you the opportunity to explore available resources, such as tax guides, crypto tax tools (e.g., CryptoTaxCalculator), and professional services. These resources can provide valuable insights, guidance, and support to help you navigate the crypto tax landscape effectively.

Also, don’t forget that you have tax deadlines! In Australia, the deadline this financial year period for individuals filing without an accountant is 31st October 2023, while the deadline for individuals filing through an accountant is 31st March 2024. If you file your taxes after these dates without an extension, you’ll face the risk of penalties and late fees imposed by the ATO.

Seek professional advice if required

While it’s certainly possible to handle your tax obligations independently (i.e., doing it yourself manually in a spreadsheet or using tax software as seen earlier), seeking the guidance of specialised tax professionals can be beneficial, especially for individuals with more complex transaction histories.

It’s important to note that while hiring a tax professional can be costly, there are many benefits that may make it a worthwhile investment:

1. The Complexity of Crypto Taxation

As we know by now, crypto tax laws can be complex and intricate. Tax professionals who specialise in cryptocurrencies (e.g., accountants or crypto tax lawyers) possess the expertise and knowledge to navigate these complexities effectively.

They stay up-to-date with the latest regulations, ensuring that you receive accurate advice tailored to your specific situation.

2. Maximise Deductions and Benefits

Tax professionals can help identify potential deductions and benefits you may not be aware of. They can also advise on strategies to optimise your tax position (e.g., tax loss harvesting) which could potentially minimise your tax liability.

3. Addressing Unique Circumstances

If you have a large number of complex crypto transactions (e.g., day traders who are trading as a business) or if you find yourself in a particularly unique situation (e.g., investors who have lost large amounts of money due to rug pull scams), seeking professional advice becomes even more crucial. Tax professionals can assist in accurately accounting for these activities and ensuring compliance.

4. Peace of Mind and Risk Mitigation

Engaging a tax professional minimises the stress and uncertainty of navigating crypto tax obligations on your own. It reduces the risk of making costly mistakes or oversights that may lead to penalties or audits.

Remember, while seeking professional advice is beneficial, it’s important to choose reputable and knowledgeable professionals who can guide you through the complexities of crypto taxes in Australia.

Stay updated with ATO rules & guidelines

The crypto tax landscape is constantly evolving, with tax authorities regularly releasing new updates and regulations.

It’s crucial and up to your responsibility as an investor to be across the tax implications of your crypto activity. Simply saying you ‘didn’t know’ about a specific tax rule will not hold up well if and when you need to defend your case to tax authorities.

In 2014, the ATO released their initial guidance paper titled ‘Tax Treatment of Cryptocurrencies.’ This paper stated that if cryptocurrencies were used for purchasing goods or services, any resulting capital gain or loss would subject individuals to Capital Gains Tax (CGT).

Later in 2017, the ATO followed up with a more comprehensive guide, stipulating that cryptocurrency transactions must be reported as part of an individual’s taxable income.

Since then, the ATO has continued to issue updates on various activities including wash sales, airdrops, staking rewards, and more.

If you find yourself wondering where to stay informed about these ever-evolving rules, here are a few reliable sources you can rely on:

• Visit the ATO website

The ATO offers valuable resources on their website, covering topics such as tax treatment, record-keeping, and capital gains on crypto assets. Checking their dedicated crypto assets section regularly ensures you are aware of any new updates or changes.

• Follow reputable news sources and crypto tax platforms

Stay connected to reputable crypto tax news sources like Coindesk and CoinTelegraph or utilise comprehensive ATO tax guides provided by crypto tax platforms like CryptoTaxCalculator. These sources often track and report on new updates released by the ATO.

• Consult with specialised tax professionals

Engage the expertise of specialised tax professionals, such as crypto tax lawyers or accountants. They possess in-depth knowledge of tax rules and legislation, and they can provide insights on the latest crypto developments, ensuring you make well-informed decisions.

The takeaways

By staying up-to-date with ATO rules and guidelines, you demonstrate a proactive approach to your crypto tax obligations.

This knowledge will empower you to navigate the evolving landscape confidently while also ensuring compliance.

Further reading: Explore all things crypto in our learning hub.