Learn about the pros and cons of cryptocurrency accounting. Here are a few things you should know as a practising accountant in Australia.
In the emerging world of blockchain, cryptocurrency needs to be tracked and accounted for as it's considered an asset for capital gains tax (CGT) purposes. In Australia, your transactions involving crypto assets are subject to the same tax treatment as other assets, and you must keep accurate records of every CGT event.
It goes without saying that you need to know your obligations when dealing with cryptocurrency. If you’re an accountant, or experienced in self-managing your own finances, understanding the fundamentals of accounting will assist you when you first tap into accounting for cryptocurrency. However, the greater the amount of transactions you need to process, the more complicated it is to keep up with regulations, as well as the more time it takes for manual accounting.
As a practising accountant, you need to know about the impact that cryptocurrency has on standard accounting practices. For businesses, the most crucial factor that will make reporting your crypto transactions for tax purposes as seamless as possible is having good, reliable financial records. Keeping regularly updated records of all your crypto transactions and data is instrumental in helping you manage your business, make sound decisions, and report to the ATO with confidence for the first time.
For accountants, there’s a number of pros and cons of cryptocurrency accounting that are important to know before getting started, including:
1. Understanding the ins and outs of crypto accounting is an extremely beneficial skill to have as part of your practice. Most clients don’t understand thorough reconciliation nor the tax process and need help around understanding the business structure. If you’ve got the expertise, you can offer your clients the help they need.
2. Accounting for cryptocurrency will be easier once you learn the basic concepts, rules and regulations involving digital currency.
3. Clients are willing to pay extra as processes are very time consuming.
4. Software choice or process set-up is very important and that’s when clients realise they need help. Since most clients don’t have the time to understand advanced software nor are familiar with complicated processes, your expertise will be extremely valuable.
1. All software solutions miss something, and you need to decide on a process that works for you. Since the recent boom of the crypto market, a multitude of software and fintech solutions have been released to address the complications of crypto taxes and accounting. Choosing the best crypto accounting software for you requires due diligence and doing your research before jumping right in.
2. Precise record keeping can be very difficult without a system. If you’re dealing with a high volume of transactions, sticking to a manual accounting process isn’t realistic nor viable. We recommend finding a software that automates the process for you, so you aren’t wasting your time on a task that can be done in seconds.
3. Clients have not been the best at record keeping due to a lack of solutions in the past. Clients may come to you with their crypto transactions and data in chaos. An intuitive crypto accounting software will be your friend in these cases.
4. You need to learn basic terms and concepts that you may not have learnt about before. Crypto accounting comes with a bucket of new information that you need to become familiar with. For example, you should know what a NFT is as a crypto accountant.
5. The more advanced crypto operations become, the more time consuming it is to understand legislation. Understanding the treatment of cryptocurrencies according to the ATO is pivotal to accurate reporting when it comes to tax season.
6. Country to country legislation is different. It shouldn’t be assumed the regulations that apply to cryptocurrency in Australia are the same in other countries. It’s important to do your due diligence and research when dealing with international clients.
Understanding the pros and cons of cryptocurrency accounting is the first step towards being a crypto accountant. Being aware of the advantages and disadvantages allows you to determine what you need to look out for as an accountant, what you can do to further help your clients, and what solutions you may need as you tap into this emerging field.
Interested in crypto accounting? Learn more about our intuitive crypto accounting solutions and how they can help leverage your crypto transaction management and processes.
Leanne Sta Ana
Leanne is a Marketing Assistant at AEM Algorithm. With a strong background in copywriting and content creation, Leanne combines her love for creativity and innovative marketing with strategic research and methodical thinking. Leanne graduated with High Distinction in the Bachelor of Communications (Professional Communication) at RMIT University with a specialisation in Media.