Specialist crypto tax accountants

Crypto Accounting FAQs

• Why do I need a specialist crypto tax accountant?

  Our team of crypto accountants are truly passionate about crypto and have in-depth knowledge of both the rapidly evolving crypto ecosystem and the changing tax regulations, enabling us to service even the most complex crypto clients that traditional accountants would not be able to assist. Our team of crypto tax specialists will help you navigate the nuances of crypto tax, reduce your tax liabilities and minimise the risk of costly errors or audits.

• How is cryptocurrency taxed in Australia?

  Cryptocurrency is considered a form of property and is subject to either capital gains tax (CGT) or income tax depending on whether you are a crypto investor or trader. This means that if you sell, trade, or use your cryptocurrency to purchase goods or services, you may need to pay tax on any gains you’ve made. Income generated from activities like staking is also generally considered to be assessable income for tax purposes. The specific tax treatment and tax concessions available will vary depending on an individual’s circumstances and so it is important to understand what tax rules apply to you to ensure compliance and avoid any potential ATO penalties/fines.

• I’ve only ever traded crypto for crypto – do I still need to report my trades?

  All crypto trades, regardless of whether they are crypto to fiat or just crypto to crypto (e.g. trading BTC for ETH) are taxable events and gains/losses need to be calculated and reported.

• I’ve only made losses – do I still need to report this?

  All trades, regardless of whether a profit or loss was made, need to be accounted for and reported. Further, any losses you have made can be carried forward to future years where they can be used to offset any future gains which can lead to substantial tax savings in the future!

• I’m an NFT trader, can you help with my tax reporting?

  Absolutely! We assist many high-volume NFT traders navigate the reporting requirements for their trading activities and prepare their NFT trading reports. Depending on your specific circumstances, NFT traders are often subject to the trading stock rules, and so it is important to understand how these rules apply to you to ensure compliance with current tax legislation.

• I’ve been hacked and my wallet has been drained – can I claim this as a loss?

  In most circumstances, yes, you can claim a loss when you have had assets stolen. It is important to ensure that the events surrounding the hack are appropriately documented and recorded in case these losses are ever questioned by the tax office.

• How is my DeFi (decentralised finance) activity taxed?

  The tax implications of your DeFi activity will vary depending on what the specific activity is. For example, swapping tokens on dexes are all taxable events and gains/losses need to be recorded for the tokens being sold. Further, income earned from providing liquidity to pools or from staking will generally be classed as assessable income. There are many different DeFi protocols available for use, all with subtle differences and potentially varying tax consequences, and so it is important to understand how different types of transactions are taxed to ensure compliance with current tax legislation.

• Does the tax department know about my on-chain activity/trades?

  Public blockchains are exactly that – public! Therefore, it is very easy to trace a crypto wallet to an individual, and the latest crypto analysis software employed by large organisations like tax agencies makes it even easier.

• I have tens of thousands of transactions, can you help?

  Yes, we assist clients with any number of transactions. Most of our clients are extremely active and accumulate thousands and thousands of transactions which we will sort through and ensure they are accounted for correctly.

• I have accounts with many crypto exchanges and have countless crypto wallets – can you still help?

  Yes, we use specialised software to aggregate your crypto data from all sources, which simplifies and streamlines the crypto reporting process. Most of our clients have accounts with several exchanges and use many different crypto wallets for their on-chain activities.

• What information do I need to provide you for my crypto tax reporting?

  You will need to provide data from all centralised exchanges (either in the form of read-only APIs or CSV exports) along with the addresses of all crypto wallets you have used. Once we have this information, we use specialised software to aggregate all of your crypto data so we can begin reconciling your transaction history.

• Can you prepare my whole tax return?

  Yes! As registered tax agents we prepare tax returns on behalf of our clients. We will use the crypto tax reports we prepare and will then request additional information pertaining to your other non-crypto activity such as share trading, rental properties, work deductions etc and will then prepare and lodge your tax return with the ATO.

• Can I setup a crypto SMSF with you?

  Yes, we help clients setup self-managed superfunds that invest into crypto and assist with the ongoing management of the SMSF’s compliance obligations. Please refer to our SMSF page for more details.

• I work for a DAO and get paid in crypto/stablecoins, do I need to report this income?

  All income that is generated for providing services needs to be reported, regardless of whether it is paid in fiat, cryptocurrency or by some other means and is taxable when it is earned (usually when it hits your designated wallet address). Income earned for providing services to DAOs is generally treated as “personal services income” where specific rules apply to how this income is taxed and so it is important to understand if these rules apply to you.

• I already have an accountant, can you just prepare my crypto tax reports?

  Yes, we have many clients who engage us solely to prepare their crypto tax reports. They will then provide these reports to their traditional accountant who will use them to prepare their tax return.

• Do I get a tax return lodgement extension if Tax On Chain prepares my tax return?

  Yes you do! By lodging with a tax agent, you get an extended lodgement date of 15 May the following year, which is an additional 7 months from the standard 31 October deadline!

• What do the crypto tax reports contain?

  We prepare a comprehensive set of reports depending on your requirements and tax classification (investor or trader). The reports we prepare can include a report summary/overview, capital gains report, income report (staking, interest etc), expense report, inventory report, trading stock report and a transactions report. All reports are incredibly detailed, including timestamps, transaction hashes, data source etc – everything you will need in case of an audit.

• How much do your crypto tax reports cost?

  Costs will vary depending on the volume and complexity of your transactions. We can’t estimate fees until we have reviewed your crypto data so we know how much work is involved. If you would like a no obligation quote, please get in contact with us!

• What accreditations do you have?

  Tax On Chain is a public practice registered with the Chartered Accountants Australia & New Zealand (CAANZ), it is a tax agent registered with the Tax Practitioners Board and is a member of Blockchain Australia.

• Can I use Tax On Chain for my business?

  Absolutely. We offer bespoke services to both traditional businesses and crypto-native businesses/DAOs, ranging from crypto tax reports to virtual CFO, accounting and bookkeeping solutions.

• Can you assist network validators?

  Miners

  Whether you’re mining your favourite token or have established a complex multi-rig Bitcoin mining operation, we assist our clients in assessing their taxable revenue, allowable deductions, eligibility to access certain tax concessions and how to appropriately assess depreciation on the hardware used in their operations.

  Node operators

  Innovations in proof-of-stake have significantly reduced the capital intensity of validating blockchains, allowing more users to participate in securing these networks. Decentralised oracle networks also serve as key infrastructure in securing data transmission and allow smart contracts to execute effectively. We assist node operators in assessing their taxable revenue, allowable deductions, eligibility to access certain tax concessions and how to appropriately assess depreciation on the hardware used in their operations.

• How can professionals in the crypto space benefit from your services?

  Auditors

  Auditing the activities of businesses and crypto self-managed super funds that have been participating in the crypto ecosystem can be difficult, especially if you have a limited understanding of how these networks operate. As Australian crypto tax professionals, we work with auditors to assist them to understand and verify the activities of their clients.

  Accountants & lawyers

  Crypto is a niche that many professionals struggle to advise effectively on as their knowledge and understanding of how these networks operate is limited. As specialist crypto accountants, we provide bespoke services to other professional firms, enabling them to appropriately service their own clients active in the crypto ecosystem.

  Professional & regulatory bodies

  Tax On Chain works with professional and government bodies to assist in the development of appropriate regulations and Australian crypto tax policies to ensure appropriate and fair outcomes for all stakeholders. Our team of crypto accountants have previously taken part in panel discussions organised by Chartered Accountants Australia and New Zealand (CAANZ), and Blockchain Australia at Blockchain Week 2022.

• How do you address the needs of individuals participating in decentralised finance (DeFi)?

  Lending & borrowing

  We assist DeFi participants who are borrowing and lending on decentralised money markets navigate the complex DeFi tax implications that can arise when transacting on these protocols.

  Liquidity providers

  We assist liquidity providers in determining what transactions constitute taxable events and how to calculate their assessable income.

  Yield farmers

  DeFi protocols have given rise to unprecedented opportunity to generate yields that far exceed what is possible in traditional finance. Complex yield farming strategies are not only stressful to manage but can be a nightmare when it comes to record keeping. We assist yield farmers in maintaining appropriate records and determining their crypto tax obligations in Australia.

  Staking

  The Australian crypto tax implications of staking your crypto to a network or protocol can be complex and confusing. We assess our client’s staking activities to help them understand their tax obligations.

  Airdrops

  Airdrops are commonly used by new protocols to incentivise users to use their product and the tax treatment of these airdrops are commonly misunderstood. As crypto accountants, we understand the crypto tax obligations that arise as a result of receiving airdrops.

  Decentralised autonomous organisations (DAOs)

  DAOs are a novel way to organise both financial and human capital with some of the largest existing DAOs controlling treasuries worth billions of dollars. We provide financial accounting and management reporting services to DAOs, enabling them to maintain proper financial records of their treasuries and operating activities. Accurate financial statements are critical in providing token holders and other stakeholders with confidence in a DAOs financial management and necessary to appease potential investors.

• What traditional market participants do you service?

  Passive investors

  As a passive investor we can assist you in understanding and calculating your cryptocurrency capital gains tax obligations and work with you to take advantage of tax minimisation strategies, allowing you to plan appropriately for the future so you can to continue to grow your wealth.

  Traders

  If you are regularly trading in spot/futures markets or flipping tokens on decentralised exchanges, you may be deemed a trader for tax purposes and will be subject to slightly different tax rules. Our crypto accountants assess your activities to ensure their income is classified and calculated correctly.

  Businesses

  Businesses operating in the crypto and blockchain space or accepting cryptocurrency as payments are often misunderstood by traditional accountants. We offer a full suite of bookkeeping, accounting and management reporting services work, ensuring businesses are meeting their reporting and compliance obligations.

• Do you provide services for individuals partaking in the metaverse?

  Gamers

  Decentralised games and virtual worlds have given rise to innovative play-to-earn models and unique methods for gamers to earn an income. We work with gamers to assess whether their activities are taxable and how to calculate their cryptocurrency taxable income.

  NFT collectors

  NFTs and digital collectibles are assets that are commonly overlooked by investors but may still be taxable depending on the circumstances in which they were acquired. We assist our clients in determining the NFT tax implications of these unique crypto investments.

  Virtual real estate

  There has been an explosion in virtual real estate transactions in recent times as the Metaverse gathers momentum and innovative companies establish virtual headquarters. We assist our clients in understanding the crypto tax implications of buying, selling and renting virtual property.