Independent Reserve Tax Guide

What is Independent Reserve

Independent Reserve is Australia's trusted cryptocurrency exchange platform since 2013. This platform offers secure investment opportunities in top cryptocurrencies leading in liquidity and tradeability.

• Access to top cryptocurrencies: Independent Reserve provides Australians with secure accessibility to the world's most liquid and frequently traded cryptocurrencies.
• Investor confidence: With over 250,000 investors, including individuals, businesses, asset managers, family offices, and SMSFs, Independent Reserve has instilled trust within a wide spectrum of Australian investors.
• Secure and easy transactions: Independent Reserve offers instant 24/7 AUD deposits via bank transfer, PayPal, and debit or credit cards, providing seamless investment opportunities to Australians.

Do you have to pay tax on crypto?

Ever since the first ATO crypto tax guidelines were introduced back in 2014, it’s been clear that crypto is taxable.

In Australia, you're legally required to declare all your income, including what you earn or lose from crypto on Independent Reserve.

ATO tax treatment of crypto

There are two types of assessable income that your Independent Reserve investments are taxed on in Australia:

Capital Gains Tax (CGT): You’ll end up with capital gains whenever you purchase crypto, and later sell it for a higher price. Capital gains and losses can result from trades, swaps, disposals and many other types of transactions.

Example: You purchase Polygon on Independent Reserve and later sell it, creating a Capital Gain that you must declare CGT on.

Ordinary Income: You can easily end up earning income from a range of sources such as referrals, airdrops, staking and many more. These sources of income also need to be declared on your income tax return.

Example: You receive an airdrop on Independent Reserve, leading to Ordinary Income which must be declared.

Crypto tax is complicated, and it’s important you understand what records you need to keep and how to calculate your tax outcomes. That way you won’t make mistakes that could trigger an ATO audit.

Penalties for not declaring tax

The ATO has an annual operating budget of over $3.6 billion to administer Australia's tax system. The ATO takes tax avoidance very seriously and has a specialised Black Economy Taskforce to ensure all Australians pay their fair share. Failure to declare taxes in Australia carries serious consequences including penalties, interest charges, fines and criminal prosecution for tax evasion.

Investors on Independent Reserve who skip declaring their crypto income are under tremendous risk. The good news is, Australia has one of the highest rates of tax adherence, with over 93.7% of taxpayers fulfilling their obligations, making those attempting to evade taxes a tiny minority.

Even being late to lodge your tax can be risky, putting you into bad standing with the ATO and the Australian Government, and increasing the likelihood of a review or audit. You’ll also find it much harder to get a loan or borrow for a home mortgage.

Does Independent Reserve report transactions to the ATO?

Independent Reserve is an Australian registered entity, Independent Reserve Pty. Ltd. (ABN 46 164 257 069). As an Australian digital currency exchange, it's a legal requirement for Independent Reserve to register with AUSTRAC, perform KYC and know the identity of their customers. This is important for preventing scammers and criminal activity.

Since 2019 the ATO has been operating a data sharing program with Australian Digital Currency Exchanges. Under the data sharing program, Independent Reserve must provide transaction data of their users to the ATO.

In short, the ATO knows about your transaction history on Independent Reserve.

You’ll know the ATO has your crypto transaction data, as it will show in the prefill report on your tax return. That means it's important that you do calculate and declare your crypto gains, otherwise it’s only a matter of time before you end up under audit by the ATO.

ATO record keeping requirements

To complete your crypto taxes each year, there’s some important records that you need to keep. Having these records will help you to calculate and declare your crypto tax, and are also your evidence if you need to prove how your crypto tax was calculated.

The ATO record keeping requirements for crypto require you to keep the following:

• receipts when you buy, transfer or dispose of crypto assets
• a record of the date of each transaction
• a record of what the transaction is for and who the other party is (this can just be their crypto asset address)
• exchange records
• a record of the value of the crypto asset in Australian dollars at the time of each transaction
• records of agent, accountant and legal costs
• digital wallet records and keys
• a record of software costs that relate to managing your tax affairs

The ATO has also advised that records should be kept for at least 5 years.

Independent Reserve Account Statements

Independent Reserve has made an account statement export available to ensure you can meet your record keeping requirements. You can follow the account statement export instructions from Independent Reserve to download a copy of the files.

You can download the following account statements from Independent Reserve.

Your crypto tax software may also be used to satisfy the ATO record keeping requirements. Syla has been designed to satisfy Section 121.20 and Section 121.25 of the Income Tax Assessment Act 1997, that deals with ATO record keeping requirements.

Syla is an industry-leading crypto tax software that can be used for Independent Reserve. Syla can be used to record your transactions by API Sync or File Import. Syla keeps a record of the original source data, in the exact format it appeared on your account in Independent Reserve, ensuring you meet your record keeping obligations.

Having your records is just step one, because now you’ll need to calculate the tax outcomes for each and every transaction. You’ll need to make sure you do it accurately, or you’ll be at increased risk from the ATO.

How is crypto taxed on Independent Reserve?

We all know that crypto is taxed, but the exact tax treatment can vary. Understanding exactly how your different crypto transactions are taxed can not only help you meet your tax obligations, but it can actually help you to make smarter investment decisions.

Important: In the following sections we are considering the tax treatment of an individual investor. If you’re a trader or a different entity such as a Company, Trust or SMSF, your tax treatment may vary.

When you buy crypto on Independent Reserve, it is a purchase of a CGT asset for tax purposes. Whenever you purchase a CGT asset you must record and track the cost base.

When you later sell crypto, you’ll need to record the proceeds from the sale. By subtracting the original cost base from the proceeds, you'll be able to calculate and declare the resulting capital gain or loss.

The basic idea works like this:

• If your crypto went up: declare the increase in value as a capital gain.
• If your crypto went down: report the decrease in value as a capital loss.
• If you held crypto over 12 months: it’s eligible for the 50% CGT discount.

The calculations for CGT can get very complicated, which is why our tax team wrote an in-depth guide on how to calculate CGT on crypto.

If you've deposited or traded foreign currencies such as NZD, USD, SGD on Independent Reserve, then you’ll need to calculate your foreign currency gains and losses.

Foreign currencies are treated differently to crypto. In Australian tax law, foreign currencies are treated under Division 775 of the Income Tax Assessment Act 1997. Instead of capital gains and losses, you’ll have foreign currency gains and losses.

Just like your crypto investments, you’ll need to calculate and declare your foreign currency gains and you can claim any foreign currency losses.

Watch out: Treating foreign currency as crypto is a common mistake from less accurate tax software. Make sure your crypto tax software actually handles foreign currencies correctly, otherwise they are putting you at risk with the ATO.

Margin trading on Independent Reserve allows you to borrow fiat or crypto to use in your trading. Margin trading allows you to buy or sell more than you normally would.

By borrowing crypto and selling it, you can short the market and profit from a drop in price. By borrowing fiat and using it to buy crypto, you can go long and profit from an increase in price.f

Margin trading is treated differently to derivative contracts such as futures. The reason for the difference in tax treatment is because when margin trading, you do own the actual asset

Because you own the asset when margin trading, your crypto is still subject to Capital Gains Tax when you acquired it for an investment purpose. It’s even possible for your crypto to be eligible for the CGT discount if you held it over 12 months.

Self-Managed Super Funds (SMSFs) are a separate legal entity with different tax outcomes to individuals. Due to the requirement for the SMSF to pass an external audit each year, it's also important that all crypto records are kept in perfect order. Fortunately, you can get an Independent Reserve SMSF account that will keep your fund compliant.

The tax treatment for an SMSF entity is different to your individual tax. The biggest difference being that an SMSF is only eligible for a 1/3 (33.33%) discount, rather than the normal 50% discount that individuals are entitled to. Despite some differences, crypto held in an SMSF is still treated as a CGT asset that is held for an investment purpose.

When calculating the tax outcomes for an Independent Reserve SMSF, it's important to use Australian crypto tax software that has an account type specifically designed for SMSFs. This will ensure your SMSF passes its annual audit.

Read more: How to setup a crypto SMSF

A Trust account on Independent Reserve is tailored for individuals or business who have a more sophisticated investment strategy. This type of account allows the trustee to buy, sell, and hold crypto on behalf of a Trust entity, such as a Family Trust or Discretionary Trust. The account is set up in the name of the Trust and is distinct from any other personal or company accounts.

In Australia, the tax treatment for a Trust differs from that of an Individual or Company. Importantly, any profits or gains from trading or holding crypto are distributed to the beneficiaries of the trust, who are then taxed on the income. It’s crucial for trustees to maintain accurate records of all transactions, including the dates, amounts in Australian dollars, and details of each trade or investment.

For Australian businesses, Independent Reserve offers the option to open a Company (Pty Ltd) account. This type of account is designed for Australian private companies who are looking to trade or invest in crypto. A Company entity can also be a popular option for individuals who choose to trade under a Company for the tax benefits that are available.

The tax treatment for a Company trading crypto is different from individuals. Any income made from crypto trading in a company account are subject to corporate income tax rates, not personal income tax rates.

If a Company holds the crypto for an investment purpose, than the usual CGT rules still apply. However, there's one critical downside to a Company, that often makes it an unnatractive tax environment for holding long-term crypto investments:

A Company entity is not entitled to the CGT discount for crypto that is held over 12 months.

If the Company instead holds crypto as trading stock in a business activity, then the usual CGT rules no longer apply. Instead, sales of crypto are treated as income, purchases of crypto are treated as an expense, and trading stock rules must be applied to account for any increase or decrease in closing stock value.

Latest ATO advice on Independent Reserve

If you want to know what the ATO thinks about your investments on Independent Reserve, then you should read some of their latest advice. Here's some of the ATO's most recent tax guidance on Independent Reserve.

How to do your Independent Reserve taxes

By now, you've likely realised there can be a lot to crypto tax, and getting it done correctly can be tricky. Let’s find out how you can actually get your Independent Reserve tax sorted.

ATO tax lodgement deadline

Our Australian financial year starts on the 1 July and ends on the 30 June each year, and you can prepare and lodge your tax return anytime after the 30 June up to 31 October.

The tax deadline for individual taxpayers is 31 October. Once you go past that date, your tax return is overdue, and your risk of penalties is increasing.

There is one way that you can easily extend your lodgement deadline though. You can receive an extended lodgement deadline till 15 May when lodging through a registered tax agent.

Some taxpayers find themselves with years of overdue tax returns. Unfortunately, the problem won’t just go away by ignoring it, and it’s only getting bigger in the meantime. With the ATO no doubt using the data collected from Independent Reserve more effectively each year, it’s only a matter of time before they catch up with you.

If you do have overdue tax returns, then it’s always worth working with a good tax accountant. They’ll be able to help you get your tax affairs back up to date. In many cases, investors can even end up receiving tax refunds from years of unlodged tax returns.

Self-lodge vs using an Accountant

When lodging your tax return, there’s two ways to go about it. Self-lodge yourself through myTax (myGov), or by lodging through a tax agent.

Self-lodging your tax return is definitely more affordable, as it means you don’t have to pay for an accountant. However, you’ll need to be much more careful about how you calculate and declare your tax outcomes. Follow our comprehensive guide to self-lodging your crypto tax.

Using an Accountant does cost more, but it will save you a lot of headache, and you won’t have to worry whether your tax return was done correctly. You’ll also have someone you can ask questions and get tax advice from. If your crypto activity is particularly complex, then it might be worth looking at a crypto tax specialist to help you.

Regardless of which approach you take, you’ll need some type of tax software for recording your crypto transactions and calculating the tax outcomes.

If you’re an Australian taxpayer, then it’s advisable to use tax software built specifically for Australia, otherwise the tax calculations may not be done correctly, putting you at risk with the ATO

How to select crypto tax software

When it comes to managing crypto taxes in Australia, choosing the right software is crucial for compliance and ease of use.

Tax regulations and compliance requirements vary significantly across jurisdictions, and what works in one country may not be suitable in another. Australian crypto investors need tax software that is specifically tailored to the unique aspects of Australian tax law. It's essential that the software not only calculates these taxes accurately but also updates its tax logic as tax laws evolve.

Ensure the crypto tax software is built specifically for Australia. Otherwise you may declare your tax incorrectly or overpay more tax than required.

You should also check for the software’s ability to integrate with popular Australian and international crypto exchanges. Having good support for Independent Reserve is a must, but you should also consider any other platforms you trade on.

Quality integrations are vital for maintaining accurate and complete records of all your crypto activities.

Crypto tax is complex, so having software that is user-friendly and intuitive will be a big help. Look for software that generates detailed, ATO-compliant reports which can be directly used for tax filings or shared with your accountant. You should also consider the level of customer support offered, and whether it's actually coming from an Australian support team.

If you don't have tax software for your crypto yet, then sign up for an account with Syla. It's the only tax software built exclusively for Australian crypto investors, and it has an industry-leading tax integration for Independent Reserve.

Using crypto tax software

Crypto tax software is designed to make doing your crypto taxes much simpler. The software will calculate all the tax outcomes for you, so you only need to import your transactions, make any edits as required, and download your final crypto tax report. All the complicated tax calculations are automatically done for you.

It’s really easy using Syla to do your crypto tax:

1. Get started with a free account.
2. Add Independent Reserve as a data source and sync your transactions.
3. Add any other platforms and wallets.
4. Review your transactions.
5. Download your Crypto Tax Report.

Syla does all the heavy lifting for you. Your transactions will be imported and the tax calculations will be done for you. When using LTFO tax optimisation you can even achieve lower tax outcomes than you normally would.

Once you've downloaded your crypto tax report from Syla, you can either give it to your tax agent, or you can use it to self-lodge your own tax return.

Importing transactions from Independent Reserve

The first step to getting your crypto tax sorted is to import your transactions from Independent Reserve.

Syla has an industry-leading tax integration with Independent Reserve. You can choose between API Sync (Recommended) or File Import.

API Sync

Using an API sync to get your transactions into Syla is the recommended approach on Independent Reserve as it’s safe and easy to do.

Important: Ensure you only ever set up read-only API keys when using tax software. This will ensure you keep your crypto safe and secure.

File Import

Using a File Import is an effective way to import all your transactions on Independent Reserve as it’s safe and easy to do.

If you get stuck, we also have an Assisted File Import process.

Download your crypto tax report

Once you have all your transactions imported into Syla, you can view them, make edits if needed and import any other Data Sources that you have.

After you’re happy with everything, you can download your Crypto Tax Report.

Tax software for Independent Reserve

It's very difficult to correctly calculate all the tax outcomes of your crypto by hand unless you're a tax accountant.

If you are using a tax accountant, then you probably don’t want them doing it by hand either, as it's going to take a long time and cost a lot.

That’s where using crypto tax software can save you a lot of time and money, that you'd rather spend doing something else. 😊

Syla is the only crypto tax software designed specifically and only for Australia. Syla not only calculates all your tax outcomes to ensure you are ATO compliant, but it also optimises your tax to ensure you pay the lowest crypto tax legally possible, saving you both time and money.

• Best value - $59 AUD for 10,000 transactions.
• Absolute certainty - purpose-built for Australian tax law.
• Maximise your tax savings - using Syla's proprietary LTFO method.

👉 Get started for free.