‘Many people misunderstand crypto tax’: Why H&R Block and CryptoTaxCalculator teamed up

It may not be as interesting as GameFi or $500k cartoon ape NFTs, but crypto taxation is an important topic for investors in this space to get their heads around.

H&R Block Australia agrees with that last point. The tax-preparation specialist last week announced it’s partnered with Sydney startup CryptoTaxCalculator to meet increasing customer needs.

CryptoTaxCalculator is a software data solution that tracks crypto activity across hundreds of exchanges and blockchains and performs complex calculations. Useful stuff – especially if you’ve been regularly trading in and out of every FOMO-inducing crypto in the top 2,000 on CoinGecko for the past year like a total “degen”.

For H&R Block Australia, which handles more than 700,000 tax returns a year, it means its accountants can now more easily and accurately generate secure crypto reports with the potential to eliminate any penalties, issues, or audits come tax time.

To get a further take on the partnership and their view of the crypto industry and crypto-taxation more broadly, Stockhead threw some questions to both CryptoTaxCalculator’s Shane Brunette and HR&Block’s managing director Brodie Dixon.

‘Crypto is here to stay’

Hi Shane. Why did CryptoTaxCalculator decide to team up with H&R Block? 

Shane Brunette: We want to make crypto tax easy and accessible to all Australians, so H&R Block was a natural partner due to their wide distribution across the country.

Crypto is here to stay, and we were excited when they took the initiative to enhance their offerings to include crypto services for their clients. H&R Block entering the space is indicative of the growth and increasing maturity of the crypto industry.

Calculating tax on myriad crypto transactions can be a nightmare for those who leave it all to the last minute or put it off (according to a… ahem, friend). Tell us why your service is needed. 

SB: The reason we created CryptoTaxCalculator was because of the personal difficulties when trying to manually track the gains, losses and cost basis across multiple exchanges, wallets and blockchains. There’s every indication that the adoption of crypto in Australia is becoming mainstream, and as a result, there’s a need to increase education about crypto-tax compliance and facilitate a more straightforward approach to staying compliant.

So we’re talking decentralised finance (DeFi) tracking, NFTs (non-fungible tokens)… the works – not just centralised-exchange transactions? 

SB: That’s right. There’s going to be increased adoption of complex instruments such as DeFi, purchasing NFTs or investing in various tokens from exchanges. Some might not realise this activity comes with its own world of tax compliance.

If [crypto investors and traders] aren’t able to accurately track and report all of this activity, then tax time will come with a nasty surprise as the ATO focuses on closing the tax gap on cryptocurrency.

The responsibility lies with the individual, to help themselves in avoiding any fines by finding a way to understand their tax obligations, keep appropriate records and overall stay tax compliant. We’re here to try to make that management easier.

‘A boom that’s opened the door to substantial gains (and losses)’

Hi Brodie. Does this partnership indicate H&R Block is seeing significant growth in the crypto industry Down Under? 

Brodie Dixon: Well H&R Block keeps on top of all tax issues affecting personal investments, and cryptocurrency is no longer an exception. Cryptocurrencies have been top of the retail investment trend of recent years, and it’s a boom that’s opened the door to substantial gains (and losses) for investors over short periods of time. So as a result, many investors are now grappling with the complexities of cryptocurrency and its niche tax obligations.

CryptoTaxCalculator has proved really efficient in helping us meet all our needs in this area.

Do you think Australian investors need to get a better handle on crypto-taxation rules – capital gains and so forth? 

BD: Yes, the tax implications of cryptocurrency gains and losses is most often misunderstood.

While the ATO continues to warn of their ability to track data from banks, financial institutions, and online exchanges, it’s crucial that you connect with a tax professional to understand exactly how your crypto investments will impact tax.

‘Many people misunderstand their crypto tax obligations’

What do you think are the main misconceptions from Australians when it comes to crypto and taxation?

BD: Contrary to what some might believe, the anonymity of cryptocurrencies in the anonymous digital world doesn’t translate to a licence to ignore tax obligations.

SB: I think the main thing we see is that some individuals think that because crypto sits outside the traditional finance sphere, it’s somehow untraceable and exempt from any tax regulation.

The blockchain is designed to be a permanent, immutable history of transactions. As an individual moves funds between exchanges, and transacts directly on-chain, this information is publicly visible for auditing purposes. It’s important to maintain detailed records of your activity for tax and auditing purposes.

Just because it’s digital currency, doesn’t make it magically disappear from your overarching revenue for the year!

There’s also a misconstrued idea about only needing to pay tax when you “cash out” of crypto into fiat/dollars, isn’t there?   

SB: Many don’t realise that crypto-to-crypto transactions, such as swapping Bitcoin for Ethereum, is also treated as a disposal for tax purposes. As a result, a lot of people misunderstand their tax obligations.

So one of the reasons we’re excited to be working with industry players such as H&R Block is to improve awareness and clarity on what constitutes a taxable event when investing in crypto.

Crypto… a big future Down Under?

What do you see happening with the crypto industry in Australia and beyond? Exponential growth? Or more of a slow burn… wait and see? 

BD: The popularity and knowledge of cryptocurrency investments has skyrocketed over the past two years, and though it may be a fool’s errand to try to predict how this rapidly changing sector will evolve, I believe that we’ll see participation continue to grow.

The early adopters of crypto were often the “true believers”, but they are increasingly being joined by investors who are holding crypto as a speculative part of a more balanced portfolio, giving them some exposure to the upside, without betting too big a share of their capital.

SB: In Australia, we’re seeing a progressive approach to the cryptocurrency industry. Our Board of Taxation is assessing ways to update policy, our tax department was one of the first movers in the world to incorporate crypto into its returns process, and the Senate Committee is looking to provide advice on how to progress the regulatory framework so it can accommodate innovation.

The Australian government has also granted about $5.6 million [AUD] to facilitate research in how cryptocurrency and the blockchain could serve to help the supply-chain industry.

All of this speaks to institutional support of the industry at a national level. The crypto markets are highly cyclical and grow in bursts, but the trend is clear. The maturing of the industry is definitely exciting.

These interviews were lightly edited for clarity. Stockhead has not provided, endorsed or otherwise assumed responsibility for any financial product advice contained in this article.

Caveat aside, you can learn more about crypto taxation in Australia from CryptoTaxCalculator here and H&R Block Australia here.