In the ever-evolving landscape of cryptocurrency, where digital assets can fluctuate in value within moments, keeping meticulous records is not just a good practice but a necessity.
Whether you’re a seasoned investor or a newcomer to the crypto world, maintaining accurate records of your transactions is crucial for tax compliance.
Here’s a comprehensive guide on what records to keep, tips for safeguarding them, and how long to retain them.
Crypto Asset Records You Should Keep
- Receipts: Keep receipts for every instance of buying, transferring, or disposing of cryptocurrency.
- Transaction Details: Record each transaction’s date, purpose, and counterparty (crypto asset address).
- Exchange Records: Maintain records of transactions on cryptocurrency exchanges.
- Value in Fiat Currency: Record the value of crypto assets in your local fiat currency at the time of each transaction.
- Costs: Keep track of agent, accountant, legal costs, and any software costs related to managing your tax affairs.
- Digital Wallet Records and Keys: Safeguard records of your digital wallets and encryption keys.
- Software Costs: Record expenses related to software used for managing tax affairs.
Tips for Protecting Crypto Asset Records
Given the volatility and digital nature of cryptocurrencies, it’s imperative to safeguard your records against loss or corruption. Here are some tips:
- Regular Export: Export your transaction history regularly to protect against loss of access to your accounts.
- Set Reminders: Set reminders to export transaction history at least every three months.
- Before Closing Accounts: Prior to closing an account, ensure you have exported the complete transaction history.
- Use Reputable Services: Find a reputable Australian crypto tax calculator or service to sync your exchange and wallet accounts.
- Blockchain Explorer: UtiliSe blockchain explorers or contact exchange customer service to recreate lost records.
How Long to Keep Records
The duration you should retain cryptocurrency records is crucial for tax compliance and potential audits. Here’s a guideline:
- Keep records for 5 years: Maintain records for at least five years from the date you prepare or obtain them, when transactions or acts are complete, or the year the capital gains tax (CGT) event occurs.
- Cover Amendment Period: Ensure records are kept long enough to cover your amendment period, typically 2 to 4 years for assessments that use information from the records.
- Language and Format: Records must be in English or translatable to English and can be in electronic or paper format.
Maintaining comprehensive records of cryptocurrency transactions is vital for tax compliance and financial management. By following these guidelines and best practices, you can navigate the complexities of the crypto landscape with confidence and peace of mind.
For further assistance, speak with your licensed tax advisor.