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As the world of cryptocurrency grows, so does the need for accountants to understand the industry and its relevant tax implications for their clients.
What you need to know to manage your client’s crypto tax return as an Accountant
16 May 2022•2 minute read
With the ATO approaching the tax return season with a renewed focus on cryptocurrency users, it’s more important than ever to get on top of your client’s crypto taxes.
How does the ATO treat cryptocurrency?
In Australia, individuals transacting with cryptocurrency may incur tax liabilities in the form of Capital Gains Tax (CGT) or Income Tax. The type of tax payable (as well as the quantity of how much) will depend on the type of transaction in question. As an example, crypto to crypto swaps (such as swapping an amount of Bitcoin for an equivalent amount of Ethereum) incurs capital gains tax, whereas receiving an airdrop would incur income tax.
You can view the ATO’s current guidelines here on what type of crypto transactions are taxable, and what type of tax is applicable. If your client has participated in any of the outlined types of transactions, you will need to file a tax return that includes that particular cryptocurrency activity.
What information will the ATO need?
- The date of the transactions
- The value of the cryptocurrency in Australian dollars at the time of the transaction (which can be taken from a reputable online exchange)
- What the transaction was for and who the other party was (even if it’s just their cryptocurrency address).
You and your client will also need to keep track of:
- Receipts of purchase and/or transfer of cryptocurrency
- Exchange records
- Records of accountant and legal costs
- Digital wallet records
- Software costs related to managing your tax affairs (that’s us!)
How do my client and I collect this information for the ATO?
You might currently be thinking about the thousands of crypto transactions your client has executed in the past financial year, and sweat might be pooling on your brow… Lucky for you, this is where we come in! In order to collect the information listed above, all you have to do is use a crypto tax solution like CryptoTaxCalculator!
- Sign up for a free CryptoTaxCalculator trial as an Accountant using the coupon code “ACCOUNTANTSDAILY_100”
- Select ‘Australia’ as your designated country
- Invite your client via email into CryptoTaxCalculator
- Work with your client to import their data into CryptoTaxCalculator from our integrations with hundreds of exchanges, wallets and chains.
- Jump into the ‘review transactions’ tab in-app, and work with your client to reconcile any necessary warnings.
- Next up is downloading your client’s crypto tax report! Following each of these previous steps will ensure that the final report is as accurate as possible.
