How to Set Yourself Up For A Cleaner Crypto Tax Year

July 1 is a fresh start in the tax world. It’s a new opportunity to implement good habits and get on top of your crypto taxes early so that you’re not left scrambling at the last minute. 

But most people don’t make any changes. So, what can this look like when October comes? You’re logging into five exchanges you can barely remember, most of your data is missing, and your accountant is asking confusing questions that you can’t answer. 

That’s a massive organisation and record-keeping problem which can quickly become stressful. Here’s how to not fall down that rabbit hole.

Start tracking from day one

The single biggest thing that makes tax time painful is trying to reconstruct a year’s worth of transactions from memory, patchy exchange histories, and screenshots saved in a camera roll.

The fix is not necessarily complicated. 

Once July 1 hits, export your transaction history from every exchange and wallet you use before the new financial year builds up. Know what you held as of July 1, what it cost you, and when you bought it. Most exchanges and wallets will automatically input this data when you export it. 

Everything from here gets added to your document as you go.

Example: You bought ETH on Swytfx, moved it to Coinbase then transferred it to decentralized platform Uniswap. When October comes you’re trying to figure out your original purchase price, the gas fees across multiple platforms, and how much the ETH was worth at the time of each swap.  

So, what can you do?

1. Export CSVs from each exchange you’ve used, detailing all your transactions
2. Record all your wallet addresses in one document
3. Screenshot your balances on June 30 

Know your cost basis before you trade

Your cost basis is what you originally paid for an asset, in AUD, including fees. It’s the number the ATO uses to calculate your gain or loss when you potentially sell.

If you don’t know your cost basis, you can’t calculate your tax. And if the ATO can’t verify it, they may assign it as zero – which means you’d owe tax on the full value of an asset, not just the potential profit.

For every position you hold going into the new year, it’s worth knowing the date you bought it, what you paid, and what fees you incurred. For older holdings where records are incomplete, it’s a good idea to sort that out now rather than at the last minute.

Edge cases

With some transactions it’s not as straightforward to figure out the cost basis as it is for others:

• Airdrops: You were airdropped tokens that had no clear value in AUD when you received them. To determine the cost basis, you’ll need to analyse market price data and figure out a reasonable value. 
• Transferring between wallets: If you transfer crypto between your own wallets, make sure you don’t accidentally treat it as a disposal. It’s typically not a disposal unless you sell the crypto, swap it for another token (or for fiat), give it away, use it to pay for fees, or spend it on goods or services.

When in doubt, consult a tax professional.

Pick a cost basis method and stick to it

Australian investors can choose between FIFO (first in, first out), HIFO (highest in, first out), or LIFO (last in, first out), provided they have records to support it. Professional traders are required to use FIFO.

The choice can affect the size of your taxable gains, so it’s worth thinking about before you start trading for the year rather than after. Switching accounting methods mid-year isn’t an option.

Example: You buy 1 Bitcoin at $20,000, and another at $60,000. Later on in the year you decide to sell 1 Bitcoin at $50,000. If you use FIFO to determine your cost basis you will have a gain of $30,000, whereas if you use HIFO you will have a loss of $10,000.

Know what counts as a taxable event

The definition of a taxable event can still catch people out. Under ATO rules, the following all trigger a CGT event:

• Selling crypto for AUD
• Swapping one crypto for another
• Spending crypto on goods or services
• Gifting crypto to someone else

When it comes to DeFi, the following are all taxable events:

• Adding liquidity to a pool
• Receiving liquidity pool tokens
• Wrapping tokens 
• Receiving tokens from an airdrop 

What’s typically not taxable: transferring between wallets you own, and holding without doing anything.

The swap rule is the one most people miss. Every time you trade BTC for ETH, or move between tokens on a DEX, you’ve disposed of an asset. That’s a taxable event, and you need the AUD value at the time of the swap to calculate it.

Track income separately from capital gains

Staking rewards, DeFi yield, mining income, and most airdrops are typically treated as ordinary income by the ATO, not capital gains. The taxable event happens when you receive the tokens, not when you sell them.

That means you need the AUD value of every reward at the exact time you received it. Not the daily average. Not the price when you eventually sell. The price at receipt.

If you’re staking or running DeFi positions, set up a simple log now. A spreadsheet works, but a tax tool connected to your wallets can be simpler and more accurate.

The 12-month clock starts on the day you buy

If you hold an asset for more than 12 months before selling, you’re typically eligible for a 50% CGT discount as an individual investor. That can make a meaningful difference to your tax bill.

Note the purchase date for every position you open. If you’re planning to sell something later in the year, check whether waiting a few more weeks gets you past the 12-month mark. 

Keep records for five years

The ATO requires you to hold transaction records for at least five years from the date you lodge your return. That includes purchase dates, AUD values at the time of each transaction, fees, wallet addresses, and exchange records.

Don’t rely on exchanges keeping your data. Policies change, platforms shut down, and accounts get suspended. Download your records regularly and keep them somewhere you control.

Use a tax tool from the start

If you’re trading across multiple exchanges and wallets, trying to reconcile everything manually at tax time can induce errors, become quite time consuming and stressful. .

Doing your taxes manually means hours (or days) of chasing down transactions, which can increase the chance of missing something. That’s where crypto tax software comes in. Tools like Summ connect to your exchanges and wallets via API, import your transaction history, and calculate your gains, losses, and income automatically. 

The time to set it up is at the start of the year, not when you’re staring down an October deadline.

If last year was a mess, fix it before it compounds

If you’re carrying unresolved tax positions, undeclared gains, or records you’re not confident in from previous years, now is the right time to sort it out. The ATO’s data-matching program collects records going back to 2014. Undeclared activity doesn’t disappear – it accumulates interest and attracts larger penalties the longer it sits.

Fixing it voluntarily is a much cheaper (and less stressful) way to do your taxes. A registered tax agent with crypto experience can help you amend prior returns before the new year builds on top of the old problem.

The short version

If you do nothing else, consider doing this: 

• Learn the basics of crypto tax and what counts as a taxable event
• Review your transactions regularly 
• Track every disposal and every income event as it happens, not later on
• Export and back up your data regularly 
• Connect your wallets and exchanges to a tax tool 

And if you’re unsure about anything, talk to someone who specialises in crypto tax accounting. Remember, it’s a cheaper conversation at the start of the year than at the end of it.

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 (formerly Crypto Tax Calculator) can help handle the complicated process of declaring your crypto asset activities with tax regulators. Summ is designed to negotiate even the most complex on-chain transactions, ensuring you stay compliant with ATO regulations while potentially minimising your tax bill. 

If you’re not already taking advantage of crypto tax software, you can make tax time easier this year with Summ. CNA readers get 30% off all paid plans by using code CNASUMM30 at checkout or by signing up here.

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This article is general in nature and does not constitute financial or tax advice. For advice specific to your situation, consult a registered tax professional. Summ is a partner of Crypto News Australia.