We understand the difficulties in collating crypto information and preparing for the end of financial year. For those of you that have bought or sold crypto, the ATO has made it clear that they are watching and therefore we have prepared our top tips to help you prepare for the end of 2024 financial year.
Contributing to a complex crypto tax landscape in Australia is a lack of legislation and guidance from the ATO. The ATO’s guidance on crypto is notoriously vague and leaves much desired. This is a developing area, and we hope to see enacted legislation for crypto, but in the meantime, we must adhere to the ATO’s guidance to the best of our abilities. The ATO’s guidance provides insights into how the ATO views different crypto activities and the associated tax implications. The vagueness and inconsistencies with the ATO’s guidance make it difficult to ensure taxpayers with crypto is compliance and it is paramount to seek specialist advice.
If you have bought or sold crypto or engaged in decentralised activities, we encourage you to take caution and seek out the services of crypto tax specialists such as Fullstack Advisory. Our team offer complimentary appointments to discuss your affairs and an appropriate plan forward taking a proactive approach to your compliance.
Recent ATO Crypto Compliance Activities
The ATO has published its guidance (QC 101717) which details its data matching program. The ATO has advised some of the objectives of the program as follows:
- Promote voluntary compliance by communicating how the ATO uses external data with their own to help encourage taxpayers to comply with their tax and super obligations.
- Identify and educate taxpayers that may have failed to meet their reporting obligations and assist those to comply.
- To gain insights that may help to develop and implement strategies to improve compliance, including educational or compliance activities that the ATO sees fit.
- To gain insights to increase the ATO’s understanding of the behaviours and compliance profiles of taxpayers that have bought, sold, or accepted crypto as payment.
- To ensure taxpayers that trade or accept crypto as payment are fulfilling their reporting obligations.
The ATO understands the complex nature of crypto may lead to a genuine lack of awareness of the associated tax implications of taxpayer’s activities. The ATO also identifies that some taxpayers may be incentivised to purchase crypto with false information making it attractive to avoid their tax obligations. The ATO is particularly concerned in the following areas and therefore hopes to identify taxpayers incorrectly:
- Reporting their capital gains tax (CGT), particularly where crypto is exchanged for another (a swap), sold to fiat, gifted, traded, or used to pay for goods or services.
- Omitting or incorrectly reporting crypto received as income (passive income (staking, LP rewards, airdrops etc).
- Omitting or incorrectly reporting Goods & Services Tax (GST) for taxpayers who are operating a business and accepting crypto as payment.
- Omitting or incorrectly reporting Fringe Benefits Tax (FBT) for employers who give crypto assets as renumeration under a salary sacrifice arrangement to their employees.
Receiving Advice
Our first proactive tip to ensure your compliance in the 2024 financial year is to engage a crypto tax specialist. The importance here is to have clarity as to the tax implications of your affairs and understanding how your crypto activities may impact your income tax obligations. Having clarity provides peace of mind and may aid your decision making.
Recording Keeping
Keeping your records in order are essential to ensure your affairs are being accurately reflected and subsequently reported in your Income Tax Return. Please see a breakdown below of the fundamentals:
- Extract your full history CSV data files from all centralised exchanges you used. If you have not yet done this for prior years you will need to extract separate files for each year. Please note, the process of obtaining this data will likely change depending on the centralised exchange you are using so please be mindful and refer to the exchange’s procedures for obtaining data.
- Provide your crypto specialist tax agent with the API keys for all centralised exchanges you use. Again, this process may differ depending on the exchange you are using, so please be mindful and refer to the exchange’s procedures for obtaining data.
- Keeping a detailed record of all other wallets and networks you are using. For example, if you have used Metamask and or if you have used Metamask on multiple networks. This can be as simple as a logbook kept in Excel or Notepad format. As you may create new wallets in subsequent financial years, or cease using existing wallets, we suggest segregating this record per financial year (1st July 20XX to 30th June 20XX).
- For those of you that have used a cold storage device (such as Ledger or Trezor) we recommend extracting full history CSV data files. Again, each cold storage device will have different methods to this so please refer to the respective device on methods of obtaining your data.
- If you have transferred crypto to friends, families, associates or otherwise, please ensure you have detailed records of these transactions. Unfortunately, there is no regulatory body to do this, so the responsibility lies solely with you. Some transactions may not have direct income tax implications (consider buying crypto on behalf of someone else and selling or transferring to another wallet), without adequate records to substantiate this transaction, the ATO will likely assess you as having sold the asset when it has left your possession.
Prepare Crypto Tax Reports
Have your crypto affairs reflected in professionally prepared Crypto Tax Reports is the best way to ensure you are compliant. By having your Crypto Tax Reports prepared professionally ensures that all data that is often missing and not accurately reflected in the reports is accounted for and reported in your Income Tax Return.
Recognising Prior Year Activity
We often see prior year activity not recognised and bought to account in the Income Tax Return due to the presumption that capital losses are not required to be reported due to having no impact to your income tax liability. Unfortunately, this is a common mistake that usually ends with the daunting task of preparing Crypto Tax Reports for prior years. This is an important task to ensure you are compliant but will also ensure that you maximise the benefits of the capital losses in a year you make a capital gain. As capital losses usually carry forward indefinitely until there is a capital gain, this provides a potential tax saving opportunity.
Reach out today!
As one of the original and largest crypto tax and advisory firms in Australia, Fullstack Advisory’s crypto tax team is committed to your success. We are committed to providing exceptional ongoing tax compliance and advisory services to the crypto community. Our crypto tax team has extensive knowledge and experience working with crypto matters from day one, including complex DeFi situations, tax structuring and strategy advice, and more.
We understand that your affairs are unique and as part of our commitment welcome you to schedule a free 10-minute consultation to discuss your affairs and how we can help. Reach out to the Fullstack Crypto Accounting Team today.
