Welcome to part 3 of Crypto Currency investing. As we’ve discussed crypto currency use can sometimes create unexpected tax and other issues for clients. Often by the time an accountant is contacted, or it is exposed to them (i.e., through ATO data matching), it can be too late to adjust plans and investment decisions. This series of reflective articles from a practising accountant outlines some common traps and possible solutions to help clients through their journey.
Today, let’s talk about the data.
Overwhelming Crypto Currency data can become problematic. Since for example, as one Bitcoin can be purchased from hundreds of people the data provided by some platforms on client activity can quickly become extreme and overwhelming especially when there are many buys and sells. This can lead to excessive time in trying to prepare your Crypto tax position which can be quite costly. I have heard about instances where determining someone’s Crypto Currency gains/losses has cost the client 10 times more than their normal yearly tax compliance.
Regarding a solution, there are some apps available that will consolidate the information from multiple platforms through data uploads. This will then generate the information you need in a sensible format. Another option is to note the Crypto Currency buy and sell information in real time, on, for example, an Excel spreadsheet. In preparing your tax, your accountant only really needs to know the date, currency, buy or sell status and amount. This information on a spread sheet may not be accepted from an ATO audit perspective, but as far as your tax agent is concerned, they are not auditing you. Also buying and selling/transferring from one Crypto Currency to another can add further complexity to this data.
Contact us to discuss the best ways to mange your Crypto Currency data.