4 Crypto Tax Tips for Australians 2024

As the Australian tax season approaches, crypto investors are preparing to tackle their mess of transactions to stay on the good side of the tax man. With the Australian Taxation Office (ATO) increasing scrutiny of cryptocurrency transactions and extended surveillance powers, it is more important than ever to ensure your crypto affairs are in order.

However, dealing with crypto taxes can be a daunting task. Many crypto investors hold multiple wallets, transact between exchanges, and engage in on-chain activities like staking, airdrops, DeFi, and NFT trading. The complexity of each of these activities can make it challenging to understand your tax obligations.

But don't let the stress of tax season get the best of you. There are a few key things you can do to get your crypto taxes in order, save time and potentially even reduce your tax bill.

How does the ATO Tax Crypto?

The ATO treats cryptocurrency as property for tax purposes, similar to shares or real estate, which means that transactions involving crypto assets are subject to capital gains tax (CGT) and income tax, depending on the nature of the transaction.

To make things simple, anything that involves disposing of crypto, such as selling, swapping, paying for goods & services, gas fees or even depositing into a smart contract could all trigger a CGT event. Transactions that resemble income, such as staking rewards, mining, interest or getting paid in crypto will likely be subject to income tax.

A key point to remember is that the ATO doesn’t just consider what you do on centralised exchanges - they also know what you are up to on the blockchain itself. Generally speaking, crypto assets are transferred on public blockchains, which are permanent, public records of all your transactions for a given crypto asset; potentially the worst place to try and avoid tax. So if you’ve been dabbling in DeFi or trading NFTs, you will also need to report these activities to the ATO or face significant tax or criminal consequences.

4 Steps to Prepare for Tax Season

The Australian financial year is fast coming to a close, which means that taxpayers have a limited window of opportunity to review their crypto tax position and make any necessary adjustments before the financial year closes. Once June 30 has passed, there’s not much you can do about your situation, which can catch many people off guard or leave them with a crypto tax nightmare.

To avoid finding yourself in a situation where a surprise tax bill slaps you in the face, here are some tips to get ahead of the June 30 deadline.

Tip 1: Ensure all your wallets and accounts are synced

To accurately report your crypto transactions, it's crucial to have all your data in one place. Make sure to add all your wallets and exchange accounts to your crypto tax software. If you've previously imported accounts, take a moment to ensure they are fully synced and up-to-date. This will help you capture all your transactions, including any new ones since your last login.

Tip 2: Review your transactions for accuracy

Once you have all your data synced, take the time to review your transactions thoroughly. Summ (Summ) provides simple review steps that help you navigate the review process and verify the accuracy of the data. If you notice any missing crypto wallets or accounts, import them to ensure your records are complete and accurate. This ensures all your assets have the correct cost base so you don’t overpay or underpay any tax.

Tip 3: Identify assets sitting at a loss and consider tax loss harvesting

With your transactions reviewed and verified, the next step is to identify any crypto assets that are currently sitting at a loss. By utilising the tax loss harvesting tool in Summ, you can quickly pinpoint assets that have decreased in value since their acquisition. Consider selling these assets before June 30 to offset any capital gains you may have incurred throughout the year. This is a strategy that may not suit everyone, so check with your accountant or tax adviser before deciding to take action.

You also want to make sure that, if you do harvest these losses, you do not reacquire the same asset within a short period. The ATO is on the lookout for taxpayers creating artificial losses with crypto asset transactions and has even threatened to cancel those losses where the sole purpose of the sale was to get a tax benefit. Taxpayers who get caught engaging in these “wash sales” end up far worse off.

Tip 4: Generate your tax reports and be ready to file

After completing the first three tips, you can now generate your tax reports and take a look at the numbers. Summ offers a range of different reports that give you a clear and easy-to-understand overview of your tax obligations. When the time comes, you can generate an accountant report pack to share with your accountant or file yourself using the ATO MyTax report.

Remember, being proactive is key to a successful tax season. By taking action now and following these four tips, you'll be setting yourself up for a smooth and stress-free experience. You may even be able to save on your tax bill. Don't wait until the last minute – start preparing today and enjoy the peace of mind that comes with knowing your crypto taxes are in order.

Summ Takes the Headache out of Crypto Taxes

Navigating crypto taxes in Australia can be a daunting task, especially when dealing with on-chain transactions involving staking, airdrops, DeFi and NFTs. Summ simplifies the complicated process of declaring your crypto asset activities with tax regulators. As one of the most integrated crypto tax software products on the market, Summ is designed to handle even the most complex on-chain transactions, ensuring you stay compliant with ATO regulations while minimising your tax bill.

If you're not already taking advantage of crypto tax software, you can try Summ for free.