Login
iscover
A new cryptocurrency client walks through the door. What should you ask?
First 6 Questions to ask your crypto clients
29 November 2021
•
2 minute read
Much like there are different personas investing in stocks, there are different audiences who interact within the cryptocurrency space.
Depending on what activities they have engaged in, how well-versed they are with cryptocurrency protocols, and how often they trade; different information will be required from each client.
1. How many exchanges have you traded on?
Cryptocurrency exchanges function in a similar way to brokerages. Users can buy, sell and convert their cryptocurrencies via an exchange. The largest difference between exchanges and brokerages is the fact that crypto users typically use a handful of different exchanges simultaneously.
For every exchange that a user has traded on, an accountant will need to familiarise themselves with that particular CSV format in order to collate each CSV file together.
2. How many transactions have you made?
Due to the volatile nature of the crypto market, the majority of crypto users are involved with short timeframe trading. When combined with trading bots and leveraged trades, it isn’t uncommon for crypto traders to have tens of thousands of transactions per year.
Most crypto-to-crypto transactions are not denominated in AUD, rather, they’re often denominated in other cryptocurrencies. There can be up to 36 decimal places involved in the prices of cryptocurrencies.
3. Do you have your own wallet?
Just like a client can have different bank accounts for different use cases, there are different types of crypto wallets. Many crypto wallets are stored directly on the blockchain, with no access to a trusted third party who can provide a transaction history CSV.
Without a software solution like CryptoTaxCalculator, accountants would need to manually enter the details of each transaction made with an on-chain wallet.
4. Have you earned income in crypto?
If a user earns their income in crypto, it is possible that they may be eligible to deem crypto as their personal use asset. If it is held for consumption or other personal use (Similar to how you would use a fiat currency such as $AUD), any capital gains made on cryptocurrency that is being used as a personal use asset up to $10,000 will be exempt from CGT.
However, if a user earns their income in crypto as an investment vehicle rather than a personal use asset, the crypto earnt may be deemed as income. The value (in AUD) of the crypto earned must be recorded as it forms part of their cost basis.
5. Have you done any margin trading?
Since users are borrowing capital from an exchange, interest must be paid on the capital that is borrowed to make the trade. Within crypto, most exchanges charge interest by the hour, thereby creating a capital gains event every hour for a singular transaction.
With borrowing rates as high as 40% APR, ignoring funding payments for leveraged trades is not an option.
6. How do I automate my client’s cryptocurrency taxes?
Rather than calculating cryptocurrency taxes by hand, the easiest way to automate this process is by using CryptoTaxCalculator, where you can easily import and reconcile cryptocurrency taxes in a few clicks. CryptoTaxCalculator is an Australian made software company, specifically designed to satisfy the unique ATO reporting requirements.
All you need to do is sign up for a free trial at CryptoTaxCalculator. This will allow you to import data and interact with the review transactions page, as well as see how the calculations are made and the associated sample reports. Once you are happy with everything you can sign up to the accountant portal and pay with your credit card. All our support is Australian based, so feel free to chat with us directly in the software if you have any questions.
