The end of the financial year is 31 March 2021. This article outlines suggested actions for end of year record keeping and accounting. We recommend you action this today! It will save you time, costs, and unnecessary complexities.
The financial year is from 1 April 2020 to 31 March 2021. You may not have your financial statements prepared until [say] October 2021 and it could be difficult to remember what transactions, exchanges, or tokens you owned 6 – 18 months ago. Wallet and exchange history are different from bank statements and do not show a closing balance each day. For example, on a bank statement you can see the balance of the bank account on a historical date, however in a cryptocurrency wallet or exchange balance, they will only show today’s balance (which results in unnecessary complexities to work backwards to calculate the tokens owned on 31 March).
To Action: Information we need to prepare your financial statements
1. A Record of the tokens you own (stock take) on 31 March 2021.
Please provide this in an excel spreadsheet including your full name, and the date of the stock take (31 March 2021). Include a list of tokens owned, quantity held, and where the token is stored (wallet address, or name of exchange, and the username for that exchange). We understand that it may be difficult to prove ownership of digital assets and quantity held at a certain date and time, but it is a fundamental part of the accounting process. This is no different from a normal business doing a stock take at the end of the financial year.
2. Download your trading history from exchanges
Please provide CSV files and trade history downloaded from all exchanges used between 1 April 2020 to 31 March 2021. This captures an audit trail of your information and is used to calculate sales, purchases, and closing stock. Every trade is analysed to calculate profit. Please do not edit the CSV files or attempt to reformat them. Please also provide us with a list of the exchanges you have used to ensure we capture all your information and ensure completeness.
Tips: With Binance exchange, you will need to download every 3-month period as a separate file (for example from 1 April 2020 to 30 June 2020, 1 July 2020 to 30 September 2020 etc). With Kraken exchange, please select ‘ledger’ from the dropdown menu, not ‘trades’.
3. Download any bank statements that include deposits or withdrawals used for cryptocurrency activity.
Please email us PDF copies of the bank statements showing fiat deposited or withdrawn from cryptocurrency retailers or exchanges. A summary of the deposits and/or withdrawals may also save us time and you cost. To provide a summary, download the bank statement into a CSV file from your internet banking, and sort of payee/description to group together all cryptocurrency transactions. The PDF bank statements would still be required by IRD (they will not accept digital excel files as confirmation of transactions due to the editable nature of the file type).
4. If you use decentralised exchanges (Uniswap, Sushiswap, Pancake Swap, Exedos etc).
Please provide your wallet addresses that are linked to your decentralised exchanges. These trading platforms are difficult to download transaction history (due to their decentralised nature).
5. If you use collateral loan positions (Celsius, Binance, MakerDAO, dYdX, Aave, Compound etc)
Please provide us with the contract address where your cryptocurrency is stored (also include in the stock take per 1 above). Please also provide details of the amount of cryptocurrency borrowed (the loan amount), the date of the loan, actions you have taken with the loan, details of full or partial loan repayment, and any amount outstanding.
For example, “I have 11.0575 ETH used as collateral on the Celsius App (address###). In return, I borrowed 5,000 USDT on 10 March 2021. The 5,000 USDT was transferred to Binance on the same date to purchase other tokens on Binance. I still owe 5,000 USDT to Celsius and have made no repayments” [the disposal of 5,000 USDT would then be picked up in the trading history from Binance in  above].
6. If you have received staking rewards (Celsius, BlockFi, Crypto.com, Kraken)
Please include a list of the rewards received (in excel) including, token, quantity, and date (this may be 52 lines of rewards if received every week). If the rewards total less than <$100 NZD, please include a single total of the quantity of rewards received dated 31 March 2021
7. Details of any expenses incurred to carry on your cryptocurrency activity.
This will depend on if you are in the business of dealing in cryptocurrency (trader) or an investor (holder). Traders are in business, and therefore able to claim business expenses (home office expense, training and development costs etc). An investor is only able to deduct costs directly associated with buying and selling cryptocurrency (exchange fees, bank fees). Accounting fees are deductible for both traders and holders.
Please send us this information
Once you have collected and prepared the information, please email it to us. Or please upload to Google Drive or Dropbox and give us access to your files.
Filing Due Date
If you have tax to pay, we recommend getting started on this ASAP to provide you certainty of the tax to pay, due date, and any provisional tax payments due.
The deadline for the year ending 31 March 2021, is 31 March 2022: yes 12 months later provided you are registered with us as your tax agent. However, we aim to have all clients returned filed before the Christmas break (December 2021).
Contact Tim Doyle for a no obligation call or meeting to discuss any cryptocurrency tax or accounting questions. Our office is in Cambridge, Waikato, or we can arrange a video conference call.
This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.