A little while ago, we did a post on busting some myths on cryptocurrency, and what you have to keep in mind for your tax return this year. But now we’re all over crypto, the Lamborghini you were going to buy with your gains is now a 1997 Hyundai Excel (that you had before anyway), and you’re about to embark on the annual chore of preparing your tax return. So what do you do?
The gist of what we reported in our previous article, was that as long as you had traded in coins and had sold some, it would be something that you’d have to report in your tax return…even if you just swapped one coin for another and hadn’t actually cashed out to Fiat.
If you’ve just bought and held, then there’s really nothing extra that you need to do for your tax return.
But if you have traded during the year, you’ll have to work out the CGT gain or loss from all your trades. You can start with downloading the spreadsheet report from Coinbase, but that only gives you very basic information, and you’ll need to do some hardcore spreadsheeting to convert the gains and losses from each trade into Aussie dollars. It’s not easy, especially because you have to separate your trades into coins that you’ve held for more than 12 months (which are taxed at half the CGT rate, not the full rate).
Even if you lost money on your trades, you should still perform this exercise, so that you can record the loss in your tax return. This loss can be used to offset any gains from other investments, either present or future.
You can just download your transaction report and hand it over to your friendly neighbourhood accountant to deal with; but if you have lots of trades, don’t begrudge your accountant if they have to charge you for a few hours of their time to untangle it all. Your accountant is not responsible for your poor life choices.
If you have lots of trades, it is probably more cost effective to use a service like Cointracker. You upload your Coinbase spreadsheet into it, and it can automatically work out your trading gain or loss in AUD$, all in a nice report that you can just hand over to your friendly neighbourhood accountant. It isn’t free, but the prices start at AUD$64 and it’s probably cheaper than paying your accountant to crunch those numbers for you. In fact, if you have a Cointracker report, the hard part is done and there’s no reason why you can’t have a go and prepare your return yourself, if you prefer to.
So good luck, and don’t forget that even if you’ve made a loss from your trades, it’s still worthwhile to calculate the actual figure and report it in your return. It might not make any difference to your tax refund this year; but if you don’t, it will mean that you’re overpaying your tax on your future investment gains, and nobody wants that.