P Xenos and M Bacina
Breaking down the complex web of crypto and tax with Digital Tax View
Spoiler alert, most Western tax systems rely to a pretty significant extent on the honesty of citizens. That reliance has been tested in the past 10 years by cryptocurrency trading permitting individuals to make significant gains without the government having a clear way to catch people who don't do properly report.
Take one part libertarian streak around many old school cryptocurrency holders, an absence of easy tools to measure trading gains and losses and a dash of lack of understanding about blockchain/tax law and you have a recipe for trouble in the tax space.
For a long time the calculation and transaction matching aspects of cryptocurrency trading to tax reporting has been horrendously complicated. This is particularly so when cryptocurrencies were traded for other cryptocurrencies (likely triggering capital gains) and existing systems around such trading were historically limited to extremely expensive foreign exchange accounting tools.
While the Australian Tax Office has been a leader in publishing guidance, the practical lack of tax tools to help traders has consistently been a problem. The uncertain nature of tokens and their treatment at law has not helped this, leading to a lot of people simply not reporting their gains in crypto. That is of course changing rapidly as the Australian Taxation Office collects data from exchanges to match up with reported gains and losses.
Two interesting Australian solutions are helping to solve this problem. They can't make the tax go away, but at least they can help the process be smoother.
The first is the KPMG built tax tool within Independent Reserve's website, which is a great value add to that exchange so customers can generate reports for their accountant for tax time.
The second is a more platform agnostic tool called Digital Tax View, which supports a number of exchanges (including Binance, BTCMarkets, Coinspot, Kraken, Kucoin, Poloniex and the oldest exchange in Australia Independent Reserve) and which may be more useful if a trader happens to spread their trading around (or trade in tokens which are listed on different exchanges).
Given Australia has trillions of dollars of retirement funds looking for greater yield (including cryptocurrencies), and with those self-managed superannuation funds subject to strict auditing requirements, the need for tax tools for cryptocurrency trading is only likely to increase in the future.