Crypto record keeping
Every time you sell, swap, exchange or trade crypto, you must calculate the tax outcomes and declare your gains and profits in your annual income tax return.
It’s important for individuals and businesses in Australia to maintain accurate records of their crypto transactions so that:
- You can accurately declare all assessable income from crypto.
- You can claim all expenses and losses you are entitled to.
- You can substantiate your tax outcomes in an ATO review or audit.
- You can manage the performance of your crypto portfolio.
By keeping accurate records, crypto investors can track the performance of their investments, identify trends, and make informed decisions about buying or selling crypto. Good record keeping will also mean that all possible expenses and losses are claimed so that you never pay more tax than you need to.
Accurate record keeping is the responsibility of taxpayers to ensure they are able to meet their tax obligations. Even if a digital currency exchange stops operating, you still have a responsibility to keep records of your transactions.
Having proper crypto records means you will be able to provide evidence to the ATO, if needed, to verify the origin of your crypto income and expenses.
Keeping records for crypto investments is particularly important, as we have seen many examples of data loss when exchanges have gone insolvent and users no longer have access to their transaction records.
If find yourself in the unfortunate situation of having your crypto stolen, lost or scammed, then having adequate records will help in providing sufficient evidence to claim a crypto tax loss on lost, stolen and scammed crypto.
ATO crypto record keeping requirements
The ATO guidance on crypto record keeping requires taxpayers to keep accurate records of their crypto transactions, including purchases, sales, trades, and transfers, for at least five years.
By properly recording your crypto transactions, you can avoid any potential penalties or fines from the ATO. To comply with Australian tax laws and regulations, you need to keep the following records for all your crypto transactions.
1. Date and time of the transaction
You must keep records of when you buy, transfer or dispose of your crypto assets, along with the date and time of each transaction. This becomes crucial for Australian investors who have to calculate their capital gains tax liability and need to determine the holding period of their crypto assets.
2. Value of the transaction in AUD
The ATO requires taxpayers to report their crypto transactions in Australian dollars. To achieve this, you must record the value of the crypto asset in AUD at the time of transaction. If there is no AUD price reference on the transaction itself, then you can find a price reference from a reputable digital currency exchange.
3. Purpose of the transaction and parties involved
Keep a record of what the transaction was for and who the other person or business involved in the transaction was. If you can’t identify the other person involved, then an on-chain public address is sufficient.
4. Digital wallet records and keys
If you use digital wallets to store your crypto, then you must keep a record of your wallet addresses and any transactions associated with those addresses.
5. Records of tax agent, accountant and legal costs
You should keep tax invoices for any professional services from a tax agent or legal professional. These are tax deductible expenses when they are related to your tax affairs. 👍
6. Records of software costs that relate to managing your tax affairs
If you use Australian crypto tax software, then you'll be able to claim it as a tax deductible expense. Syla provides an Australian tax invoice that meets all requirements of Australian tax law, so you have the perfect documentation to claim your tax deduction.
7. Records of expenses that are related to your trading or business activities
If you are a trader or a business, then you should also keep records of expenses such as equipment, software, education and any other costs directly related to your crypto business, as these can also be claimed.
Can crypto transactions be traced by the ATO?
Crypto transactions can easily be traced in Australia regardless of whether they occur on a centralised exchange platform, or on a public blockchain.
AUSTRAC reporting for Australian digital currency exchanges
The Australian Transaction Reports and Analysis Centre (AUSTRAC) is the government agency responsible for monitoring and regulating crypto transactions in Australia.
AUSTRAC requires crypto exchanges and other digital currency businesses to verify the identity of their customers and report suspicious transactions. These businesses are also required to keep records of their transactions for at least seven years and provide this information to AUSTRAC upon request.
When you register on an Australian exchange, your identity is confirmed through KYC (Know Your Customer) procedures. You'll likely remember how you had to provide details of your drivers license or other identity document. This means the exchange knows exactly who you are and what crypto investments you've made.
ATO data sharing with Australian digital currency exchanges
If you have an account with an Australian Digital Currency Exchange (DCE), then it’s very likely the ATO already has your data.
The ATO has stated that it has the ability to track and monitor crypto transactions, and that individuals and businesses are required to report any income or capital gains from crypto transactions on their tax returns.
It's been confirmed that the ATO conducts a data-sharing program with all the major Australian crypto exchanges where they request information on all crypto investments. Considering your identity is already attached to the transactions, it's a trivial exercise for the ATO to know the exact purchases and sales of crypto that you've made.
The ATO also has additional power to request and access information from crypto exchanges and other entities to help identify individuals and businesses that are not correctly reporting their crypto-related income and gains.
Tracing transactions on blockchains
If you think you can hide your crypto on-chain, then think again. Just remember, blockchains are a public and immutable database of every transaction that has ever occurred. Your on-chain transaction data never disappears and is permanently accessible to anyone, including the ATO.
As soon as your on-chain history touches a centralised exchange that knows your identity, or you use crypto for the payment of goods or services that can be linked to you, your entire on-chain history can be easily identified.
Even if the ATO doesn't not have the ability to track on-chain transactions today, they can easily can come back and trace them at any point in the future. So it’s really only a matter of time before the ATO catches on.
How to record crypto transactions
Keeping good records is especially important for crypto as it’s not uncommon to lose access to your data. You should regularly download and store your account statements and transaction exports. The ATO recommends doing this once every 3 months.
Important crypto records include:
- CSV files containing details of your trades, deposits, withdrawals and other transactions.
- PDF account statements.
If you don't want to log in and download statements every 3 months, then fortunately there's a much better way. Instead, use Syla to setup a data sync from your crypto platforms and services.
Using Syla, allows you to easily sync all your transaction data on demand, and generate reports. You can also use Syla to keep up to date on your tax position, and to generate a tax report for your annual tax return.
Tip: Use the API sync in Syla to keep a complete record of your crypto investments. Syla can also be used to calculate your tax outcomes.
To get started with Syla, sign up here.