Cryptocurrencies like Bitcoin, Ethereum, Litecoin and Ripple have risen in popularity, and a growing number of people are dipping their toes into trading on the crypto market
It covers how crypto transactions are calculated, calculation programs to save you money and the tax implications of crypto trading.
If you are time-poor, we will skip to the article's key point. If you want to save money, you seriously need to use a crypto tax calculation program like Crypto Tax Calculator. It does the time-consuming data crunching and gives you the tax reports we need.
If you choose not to use something like this and make lots of trades (even just lots of $1 transactions), please be kind to us when your personal tax return costs you $1000 this year for us to complete.
Okay, so here’s more details for those with more time.
All crypto transactions are calculated individually
Some quick background on why crypto trading might cost you in accounting fees. Every time you buy and sell a cryptocurrency or crypto portions, that transaction’s loss or gain must be calculated. Individually. Every time.
Bought twenty portions in Bitcoin when the value was low and sold them when the value rose later that day? That’s twenty transactions to be calculated.
The calculations are easy, but they add up, especially if you’re regularly trading and following the trends.
They can take hours and hours for our team, which means higher fees for you. We don’t want you to be shocked if you get a larger bill than expected.
Save on fees by using a crypto tax calculation program
We recommend Crypto Tax Calculator. It integrates with most crypto trading platforms and is tailored to the tax needs of Australian investors.
Subscriptions start from $49 per year (much less than additional accounting fees). It provides all the data needed for compliant record-keeping and calculating your tax liability.
Whilst there are other programs, Crypto Tax Calculator is the one we and other accounting firms around Australia have found to be the best. You’re welcome to research for yourself and find one that works for you.
Why does crypto trading have tax implications?
In Australia, crypto is treated as an ‘asset’, like investing in shares, and is assessed under the Capital Gains Tax rules.
If you buy and sell within twelve months, 100% of the gain is assessable as capital gains. If you hold the investment for over twelve months, the gain is reduced by 50%, and you are taxed on the other 50%.
Any losses can offset any capital gains in the current financial year or be carried forward to be used to offset future capital gains.
Are you in the ‘business’ of crypto trading?
There is another method of calculating the profits and losses on trading crypto, but it depends on whether you are in the business of trading crypto or just investing.
We look forward to assisting you this tax year. If you have any questions, please do not hesitate to contact the Preston Corporate team.