What records do I need to keep for my cryptocurrency transactions?

  • 5 November, 2024
  • 6 min read
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As an Australian cryptocurrency investor or trader, maintaining accurate records of your crypto transactions is not just good practice—it’s a legal requirement. The Australian Taxation Office (ATO) has specific guidelines for crypto record keeping, and failing to comply can lead to penalties and complications during tax time. This guide will walk you through everything you need to know about keeping records for your cryptocurrency transactions in Australia.

Why Keeping Crypto Records is Crucial

Proper record keeping is essential for several reasons:

  1. Tax Compliance: The ATO requires you to declare all assessable income from crypto transactions in your annual tax return.
  2. Expense and Loss Claims: Accurate records allow you to claim all eligible expenses and losses, potentially reducing your tax liability.
  3. ATO Audits: In case of an ATO review or audit, comprehensive records will help you substantiate your tax outcomes.
  4. Portfolio Management: Good records enable you to track your investment performance and make informed decisions.

ATO Crypto Record Keeping Requirements

The ATO mandates that taxpayers keep accurate records of their crypto transactions for at least five years. Here’s what you need to record for each transaction:

1. Date and Time of the Transaction

Record when you buy, transfer, or dispose of your crypto assets, including the specific date and time of each transaction.

2. Value of the Transaction in AUD

All crypto transactions must be reported in Australian dollars. If the transaction doesn’t have an AUD price reference, use a reputable digital currency exchange to find the appropriate value.

3. Purpose of the Transaction and Parties Involved

Document what the transaction was for and who the other person or business involved was. If you can’t identify the other party, an on-chain public address is sufficient.

4. Digital Wallet Records and Keys

If you use digital wallets, keep a record of your wallet addresses and any transactions associated with those addresses.

Types of Transactions to Record

Australians need to keep records for various crypto-related activities, including:

  • Buying and selling crypto assets
  • Trading or exchanging one crypto asset for another
  • Gifting crypto assets
  • Using crypto assets for goods or services
  • Mining and staking rewards
  • Airdrops and hard forks

How the ATO Traces Crypto Transactions

It’s important to understand that the ATO has various methods to track crypto transactions:

  1. AUSTRAC Reporting: Australian digital currency exchanges are required to verify customer identities and report suspicious transactions to AUSTRAC.
  2. Data Sharing with Exchanges: The ATO conducts a data-sharing program with major Australian crypto exchanges, obtaining information on all crypto investments.
  3. Blockchain Tracing: The ATO can trace transactions on public blockchains, especially when they’re linked to centralised exchanges or real-world identities. 

Best Practices for Crypto Record Keeping

To ensure you’re meeting ATO requirements and managing your crypto investments effectively, consider the following best practices:

  1. Use Specialised Software: Utilise cryptocurrency tax software or portfolio tracking tools to automatically record and categorise your transactions.
  2. Regular Backups: Create regular backups of your transaction records and store them securely, both digitally and in hard copy.
  3. Consistency: Develop a consistent system for recording transactions as they occur, rather than trying to reconstruct them later.
  4. Separate Wallets: Consider using separate wallets for different types of transactions (e.g., trading, long-term holding) to simplify record keeping.
  5. Exchange Reports: Download and save transaction reports from all exchanges you use, even if you no longer have an active account.
  6. Fiat Value Records: Always record the Australian dollar value of your crypto assets at the time of each transaction.

Crypto Tax Implications

Understanding the tax implications of your crypto activities is crucial for proper record keeping:

  • Capital Gains Tax (CGT): Most crypto disposals are subject to CGT. Keep detailed records to accurately calculate your capital gains or losses.
  • Income Tax: Certain crypto activities, such as mining or staking rewards, may be treated as ordinary income.
  • Personal Use Asset Exemption: If you use crypto to purchase goods or services for personal use and the cost is under $10,000, you may be exempt from CGT. However, you still need to keep records to prove personal use.
  • 12-Month CGT Discount: If you hold a crypto asset for more than 12 months, you may be eligible for a 50% CGT discount. Accurate records are essential to prove the holding period.

Consequences of Inadequate Record Keeping

Failing to maintain proper records can lead to several issues:

  1. ATO Penalties: The ATO may impose penalties for non-compliance or underreporting of crypto income.
  2. Audit Complications: Insufficient records can make an ATO audit more challenging and potentially costly.
  3. Missed Deductions: Without proper records, you may miss out on claiming eligible expenses or losses.
  4. Inaccurate Tax Reporting: Poor record keeping can lead to errors in your tax return, potentially resulting in overpayment or underpayment of taxes.

In conclusion, as an Australian crypto investor or trader, maintaining comprehensive and accurate records of your cryptocurrency transactions is not optional—it’s a necessity. By following the ATO’s guidelines and implementing best practices for record keeping, you can ensure tax compliance, simplify your reporting process, and make informed decisions about your crypto investments. Remember, the crypto landscape is constantly evolving, so stay informed about any changes in ATO regulations and adjust your record keeping practices accordingly.