Tax Return

We can help you prepare for taxation for both SMSF and individual traders and investors. 
Record keeping is very important in crypto trading. We’ll help you to record all your cryptocurrency trades. A sample is shown below.

Buy / Sell Code Name Price AUD$ Total Value Units Brokerage excl. GST Other Fee (trading & Withdrawal) Trade Date Settlement Date Exchange
1 Buy GNT GOLEM 0.65 646.94 1000 10 0.175
BUY ZRX OX 1.45 252.34 175 0.175

Which crypto activities are taxable

 These activities applies to almost all countries. 

  • When you sell your cryptocurrency for fiat (USD)
  • Exchanging your cryptocurrency for another cryptocurrency
  • Using your crypto assets to pay for goods or services
  • When you receive cryptocurrency as earnings (either through mining or as payment for services offered to a third party).

Non-taxable crypto activities. 

Not all cryptocurrency engagements attract taxes. Here are the activities you need to pay taxes on: 

  • When you move your cryptocurrency from one wallet to another or between crypto exchanges. 
  • Donating cryptocurrency to a charity organization
  • When you buy crypto with fiat 
  • When you give cryptocurrency as a gift to a friend or family. 

How To Calculate Taxes on cryptocurrency Profits:

The table below shows countries with crypto tax rules as a trader or business:

Crypto tax regulation

 Table Source: Crypto Research Report.

 

1. Crypto taxation in the US

Capital Gains Tax

Buying and holding a crypto asset and then selling it later attracts a capital gains tax (CGT). For example, if you buy bitcoin at $15,000 and sell it for $30,000, the profits (minus expenses) is CGT taxed. So, $13,000 ($2000 expenses) is Capital gains.  The amount of tax payable depends if you held the crypto assets for less than a year or over a year. 

 Two types of taxes in this category: 

  • Short-term
  • Long-term capital gains tax(tax on buying and selling).

1. Short-term capital gains

You pay a short-term capital gains tax from profits of assets you hold for less than 12 months. The table below explains tax rates that apply to each group. USA crypto traders the IRS has a  list of the tax rate that applies to short-term traders and investors. The table below summarizes tax rates and the different percentages that apply to each group. 

2. Long-term capital gains 

 The table below illustrates the tax rate for a long-term holder.  Capital gains tax on profits on sale of assets you’ve hold for over a year. See table below for a long-term holder. The rates for long-term capital gains tax are lower and more favourable to traders and investors and those who hold their crypto for an extended period. 

2. Cryptocurrency tax rules in the UK

Crypto trader in the UK, must pay capital gains tax. . Buying and selling crypto attracts a capital gains tax and receiving crypto as payment for services offered or as earnings from mining activities attracts an income tax. 

Profits below £12,500 on your crypto trade annually pay no tax. Traders earning between £12,501 and £50,000, pay 20% on your crypto profits.  See: Buy Bitcoins In UK.

3. Cryptocurrency tax rules Australia:

In Australia cryptocurrency is a capital asset when use for investment purposes and subject to capital gains tax upon sale. 

Calculating Capital Gains Tax 

Two rules:

  1. Personal use exemption- The purchase of $10,000 of cryptos would be considered a personal use asset and no tax is payable.
  2. Profit making- As a trader (speculator for short-term profit): gains from the sale of crypto will be taxed as income just as PAYG or class as another income stream. As an investor, the disposals of Bitcoin or crypto would be subject to capital gains tax, with 50% discount (holding asset over 1 year) or without discount. 

Tax Calculation in Australia:

Bitcoin assets  sold before 12 months pay full tax with no discounts for Capital Gains Tax (CGT). You’re only entitled to a CGT discount when you holding the asset for more than 12 months.
1. Sale: $50,000
2. Purchase: $40,000
3. Profit: $10,000
4. Cost base: $2,000 (expenses)
5. Tax: $8,000. Add to your taxable income.

  1. Use your capital loss against an existing capital gain, or carry it forward to a future year. If you carry a capital loss forward, you must apply it to your next available capital gain.
    2. Add your capital gain in with the rest of your taxable income. Pay tax on your total taxable income for the year.

 ________________________________________________________________________________________________________

Record keeping: 

Keep records (on paper and excel) for all your transactions with cryptocurrency transactions. The tax treatment of profits or losses on cryptocurrency once it’s sold or used. There is no tax impose on cryptocurrency while it’s held. 

Keeping good records will make it easier to calculate and meet your tax obligations. Transaction and Tax Report can be downloaded from Exchanges where you bought and sold crypto. 

Record to keep

• the value of the cryptocurrency in Australian dollars.
• what the transaction was for and who the other party was (their cryptocurrency address).

•the date of the transactions-purchase and sale dates and amounts

 Other Records to keep:

• receipts of purchase or transfer of cryptocurrency
• exchange records
• records of agent, accountant and legal costs
• digital wallet records and keys
• software costs related to managing your portfolio and tax preparation. 

The best software and platforms to help you calculate and report your taxes include: 

  • TokenTax
  • Zenledger 
  • CoinTracking
  • Bitcoin Taxes
  • Coin Tracker 
  • Koinly
  1. TokenTax- the most extensive tax calculation and crypto trader reporting software out there for any. The platform works with thousands of cryptocurrencies.

 

References:

https://coinsutra.com/crypto-tax/?utm_source=pushengage&utm_medium=push_notification&utm_campaign=pushengage.

https://www.afr.com/news/policy/tax/own-bitcoin-or-other-cryptocurrency-the-ato-is-after-you-20180703-h1265z. By Joanna Mather, AFR. (Jul 6, 2018).

https://www.itnews.com.au/news/ato-throws-data-dragnet-for-cryptocurrency-tax-crackdown-524450/

https://community.ato.gov.au/t5/Tax-wiki/How-do-I-calculate-capital-gains-tax-on-cryptocurrencies/ta-p/10970/

https://www.ato.gov.au/General/Gen/Tax-treatment-of-crypto-currencies-in-Australia—specifically-bi…/