To make things easier come tax time, the ATO and tax professionals strongly recommend you keep detailed records for all of your cryptocurrency transactions.
Keeping a journal of your transactions and activity that also details the intent behind each action can help maintain good record-keeping practice for tax purposes and can also assist in the continual assessment of your investment plan.
Examples of details you may want to record or journal include:
- Date of Activity
- Type of Activity
- Intent of Activity
- Transaction value in AUD
- Proof or acquisition or disposal
- Any other details specific to the individual nature of your activity
Example: 14-09-2020: I acquired 0.5 BTC ($7,346.03 AUD) on Independent Reserve – Transaction Record located in Independent Reserve.
It’s also important to export, save and store any records or statements obtained from cryptocurrency exchanges, brokers and wallet providers.
The ATO has extremely sophisticated and ever-improving data-matching technologies which they use to detect irregular or inconsistent behaviour.
If you fail to report all of your transactions to the ATO, it is very possible that they may detect this if you are audited and generally you are expected to keep written records of such transactions for up to 5 years from the date you lodge your tax return. Failure to correctly report or substantiate your transactions to the ATO can involve harsh punishments.