The biggest five mistakes crypto investors make at tax time

As we enter a new financial year, Crypto Tax Calculator has revealed the five biggest mistakes Australian cryptocurrency investors make at tax time. The news comes as the Independent Reserve Cryptocurrency Index (IRCI) shows that around 45% of Australian crypto investors don’t understand how their crypto is taxed in Australia and 54% have called for the Australian Tax Office to improve clarity around what is taxed, when and why.

“The biggest mistake crypto investors make at tax time is not keeping accurate and detailed records. Most crypto investors don't realise that many transactions involving cryptocurrencies could be a taxable event,” says Founder and CEO of Crypto Tax Calculator, Shane Brunette.

“Whether you’re selling, trading one crypto for another, or using crypto to purchase goods and services, these activities can trigger capital gains or income tax. Even receiving cryptocurrencies through staking rewards, airdrops, or as payment is subject to tax obligations.

“It’s critical to prioritise tax planning and compliance from the very beginning. We know the Australian Tax Office is placing increased emphasis on crypto, and you don’t want to get caught with a hefty tax bill, or penalties for noncompliance,” he says.

The 5 biggest mistakes crypto investors make at tax time:

1. Not keeping detailed records

It’s imperative to maintain comprehensive records of all crypto transactions, including dates, amounts, types of transactions (e.g., buy, sell, trade), and the value at the time of each transaction. This includes transactions on all platforms and wallets.

2. Missing taxable events

Investors should be aware of what constitutes a taxable event. Common taxable events include selling cryptocurrency for fiat currency, trading one cryptocurrency for another, and using cryptocurrency to purchase goods or services. Simply holding cryptocurrency is not a taxable event.

3. Miscalculating gains and losses

If cryptocurrencies are sold or traded there’s a need to calculate the difference between the selling price and the purchase price (cost basis). Short-term gains (held for less than a year) are typically taxed at higher rates than long-term gains (held for more than a year).

4. Crypto-to-crypto transactions, track airdrops and forks haven’t been considered

Ensure that all income related to cryptocurrencies is reported. This includes mining income, staking rewards, and any interest earned from crypto savings accounts.
It’s important to note that trading one cryptocurrency for another is a taxable event. For instance, trading Bitcoin for Ethereum requires reporting any gains or losses on the Bitcoin etraded.

5. Overlooking professional help

Consulting a tax professional who is knowledgeable about cryptocurrency and utilising crypto tax software can make light work of keeping detailed records.

“While it's crucial for crypto investors to stay proactive and informed about their tax obligations, it doesn’t need to be a headache. Regularly reviewing tax regulations, seeking professional advice, and utilising available resources can help ensure that you remain compliant and make the most of your investments,” says Brunette.