The content in this article is provided for general information purposes and is not tax, legal, investment or other professional advice. Readers should seek appropriate professional advice prior to making any decision.
Many Australians are faced with the task of lodging tax returns this year which include gains made from cryptocurrency investing. How do you calculate gains on cryptocurrency?
There is no straight forward answer to this question. However, there is the smart way and the risky way.
The risky way
The risky way refers to lodging your own tax return. You run through your cryptocurrency transaction history and calculate gains and losses. Perhaps you use a cryptocurrency tracking and reporting tool to help. Whilst this may help you calculate a number to put in your tax return, that number may not be right. Furthermore, that number may be far from right.
We all know the Australian tax system is not simple. Although it is possible for you to prepare your own tax return, there is a very good chance you won’t optimise it – you could end up paying more tax than necessary.
So, option one is you try and calculate your own crypto gains and risk paying more tax than necessary. Option two is to engage the services of a knowledgeable cryptocurrency accountant.
The smart way
If you speak with a crypto savvy Munro’s client, you’ll find out the smart way is the right way. Calculating gains in a tax effective manner is a fine art – very few accountants even know the basics of bitcoin, let alone have the knowledge and experience to process crypto trade records to tax save.
We’re fortunate to have developed specialist techniques to find that extra tax saving.
As an example, one of our clients made a cool half million dollar gain. A popular crypto reporting tool was able to run off a number of different calculation methods with varying tax payable between $141,469 and $152,641.
Using the exact same trade data, our specialist techniques allowed us to reduce his taxable gain by over $20,000 – saving him $9,246.
In fact, the savings were even more as the above does not include the reduction in the Medicare levy.
Additionally, we further reduced his tax bill by over $6,000 by adopting our tax position on chainsplits (which differs to the ATO’s broad position), and we could have saved him another $25,000 in tax had we been engaged to supply and implement tax planning advice from the beginning.
Smart crypto investors looking to save tax can contact us on 08 94275200 or submit an enquiry here