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Five questions to get you up to speed with the ATO’s new guidance on cryptocurrency taxes.
Cryptocurrency Tax FAQ’s
16 November 2021
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3 minute read
How is cryptocurrency tax calculated?
You can be liable for both capital gains and income tax depending on the type of cryptocurrency transaction, and your individual circumstances. For example, you might need to pay capital gains on profits from selling cryptocurrency, or pay income tax on interest earned while holding cryptocurrency.
Are crypto to crypto transactions taxed?
The ATO has published guidance stating that a disposal of cryptocurrency can trigger a taxable event, even when swapping for another cryptocurrency, similar to a barter trade. You are required to record the value of the cryptocurrency in your local currency at the time of the transaction. This can be extremely time-consuming to do by hand, since most exchange records do not have a reference price point in Australian dollars, and cryptocurrency can be up to 36 decimal places long.
What if my client lost money trading crypto?
The way cryptocurrencies are taxed in Australia means that investors might still need to pay tax, regardless of whether they made an overall profit or loss. Depending on the individual circumstances, taxes for individuals are usually realized at the time of the transaction, and not on the overall position at the end of the financial year. For example, if your client doubled their money and closed their position last financial year, but got their entire holdings liquidated this financial year, they will still need to consider taxes on the previous financial year's gains.
Can’t I just do this in excel?
Manually preparing cryptocurrency tax returns can be extremely time-consuming. Most crypto-to-crypto transactions are not denominated in AUD, rather, they’re often denominated in other cryptocurrencies. There can be up to 36 decimal places involved in the prices of cryptocurrencies. Cryptocurrency transactions can occur directly on the blockchain, with no access to a trusted third party who can provide a transaction history CSV.
How do I calculate my client’s cryptocurrency taxes?
Rather than calculating cryptocurrency taxes by hand, the easiest way to automate this process is by using CryptoTaxCalculator, where you can easily import and reconcile cryptocurrency taxes in a few clicks. CryptoTaxCalculator is an Australian made software company, specifically designed to satisfy the unique ATO reporting requirements.
All you need to do is sign up for a free trial at CryptoTaxCalculator. This will allow you to import data and interact with the review transactions page, as well as see how the calculations are made and the associated sample reports. Once you are happy with everything you can sign up to the accountant portal and pay with your credit card. All our support is Australian based, so feel free to chat with us directly in the software if you have any questions.
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