Here is an example EOFY Report from Coinspot, this one is 3 pages long.
The Balance Summary outlines all the “on exchange holdings” at the end of the financial year (EOFY) and shows the price of each asset held EOFY and the total AUD value of all on exchange holdings EOFY.
The Fee Summary shows the cumulative total of all buy and sell fees throughout the financial year.
The Transaction History is all the trading (buys and sells). Match the sells with the previous buys to calculate capital gains. The EOFY report and tax return from the previous years will give you starting balances and previous purchase prices. Check the establishment date of the SMSF to confirm if this is the fund’s first tax return (zero balances for start of the financial year).
The Deposit History is the record all AUD deposits. Match the AUD deposits with the withdrawals from the bank account.
The Withdrawal History is all the AUD withdrawals. Match the AUD withdrawals with the deposits to the bank account.
This is the last page of the report. Send Transaction History shows all the cryptocurrency withdrawals.
The Address is where the coins were sent to. To prove the existence of the coins you need to use a blockchain explorer .
Blockchain explorers are like a google search for cryptocurrency transactions and accounts.
They allow you to look up specific transactions or see all the transactions that have occurred in a specific account (or address). Not only can you see a list of all the transactions for the address you are looking up, you can also trace all the transactions. You can trace all the coins to see which account they came from all the way back to when the blockchain began and you can also trace all the coins from the account/address to where they are now.
Different blockchain explorers are used for different coins.
Bitcoin has https://www.blockchain.com and https://btc.com/ among others.
Ripple has https://xrpscan.com and https://bithomp.com/explorer among others.
Some blockchain explorers allow you to search many blockchains like https://live.blockcypher.com where you can look up transactions and accounts on BTC, LTC, Dash and more.
Simply enter a transaction ID or address into the search bar (normally in the top right) of a block explorer for that coin and you will see all details about that transaction or account.
Here we can see there have only ever been 3 transactions with this BTC account/address. The first 2 in green were deposits and then there was one withdrawal that sent all the coins out of the account. You can check it yourself here: https://www.blockchain.com/btc/address/357vVzuDJBQg7ohxQw4tXjYv1S2tQoGPcW
If you wanted to see where the coins came from before or went to after you could by clicking on the receiving or withdrawal address.
For this year’s accounting purposes we can see that 0.82742572 BTC was in the account at EOFY 2019.
If you scroll back up to the last page of the Coinspot EOFY Report you can see the address we are checking here is the address the coins were sent to from the exchange. We can see there were 2 withdrawals and there were 2 deposits into the off exchange address.
You will notice that the dates do really match up with the first coins being sent at 11:02am but received at 1:07am. This is because Coinspot uses Australian eastern standard time and the block explorers use Greenwich Mean Time. Considering this 10 hour time difference its matches up perfectly with the transfer taking 5 minutes to be picked by the network.
You will also that the amount sent and received do not match exactly. The first withdrawal was for 0.1005 BTC but only 0.1000 was received. This is because there is a fee to complete the transaction. In this case the fee was 0.0005 BTC or at the time abut $4.
Ethereum is a special blockchain because ethereum allows users to create coins and run them on the ethereum blockchain. There are hundreds of coins that run on the ethereum blockchain. Coins that run on the ethereum blockchain (that are not ethereum- ETH) are called ERC20 tokens. So you can use any ethereum block explorer (like https://etherscan.io) to search for the accounts and transactions of any ERC20 token.
In the above pic you can see this ethereum block explorer is similar to the bitcoin one earlier. You can check out the page here: https://etherscan.io/address/0x037DDbaDB05c024DA4F2611a3D453ECFD0B5249F#tokentxns.
You see that this address has had 3 transactions as well will 2 deposits and 1 withdrawal.
The front page of the ethereum block explorers just provides information on ethereum (ETH). If you want to see any information for any ERC20 tokens just click the ERC20 token Txns tab (see below in green).
Here you can see all the ERC20 token transactions. If you want to see the exact date of the transactions click the AGE tab (in orange above) and it will change to exact date and time.
Sometimes you will not be sure which block explorer to use. No problem.
Just go to https://coinmarketcap.com/ and enter the coin’s code (BTC, XRP, LTC etc) in the search bar on the top right (see orange circle below)
You will then be on the information page with lots of useful information about that coin. This page also has a list of the most popular block explorers for that particular coin. You see links to these block explorers on lower left of the page. See green arrow below. Over time you will become familiar with main coins and their block explorers.
Sometimes clients will be trading on exchanges that do not provide EOFY reports or any formal documentation. Other times there will be reports but they might be incomplete and we need to confirm information that is not available on the report. (Independent Reserve does not show withdrawals in their report). In these cases you need to rely on data that you can obtain from the exchanges. This is where APIs come in. An API (Application Program Interface) allows you to pull information from databases. In our case we are using APIs to pull all the deposit, withdrawal and trading history directly from the exchange. You can see an example of how we help the client to generate API keys here: https://www.youtube.com/watch?v=B5YpPwo0JtE&t=4s. By plugging the AKP keys into certain software programs you can pull all the relevant data. New Brighton Capital does this and presents into a report that breaks down the information so accountants can easily complete their work.
Both Coinspot and Independent Reserve provide EOFY Reports, and both of them provide the price of each coin held coin EOFY. Sometimes you will either not have an EOFY Report or you will but the client has moved 100% of a coin off the exchange to a holding address and the report does not show the price of the coin EOFY. In this case you need to know how to find the EOFY values.
There are 2 reputable sources to access EOFY price information.
Independent Reserve has a page dedicated to this: https://www.independentreserve.com/eofy/2019
This page shows you the EOFY values for all their listed coins since FY2015.
Independent Reserve (as of October 2019) have only 13 of the 1000’s of coins available to clients. A way to get information on EOFY values of all coins is again through coinmarketcap.com
Similar to searching for the relevant block explorer (explained above), enter the coin code in the top right hand side of the coinmarketcap.com homepage. From there, scroll down to the price chart.
Once you have the chart up you can click the Historical Data tab (highlighted in pink below).
The Historical Data section shows the last 30 days by default. You can get the EOFY prices by changing the date rage on the top right of the table (highlighted in red below). For example, select “custom” then June 29 to July 2 and you will have the EOFY balance at close June 30. Take note that these prices are in USD. You can convert the USD at the official EOFY AUD/USD rate (of 0.7332) found here: https://www.ato.gov.au/Tax-professionals/TP/Rates-for-financial-year-ending-30-June-2019/
Below is a table that outlines what tools are required to for accountants to prove…
New Brighton Capital uses the EOFY Report (where available) as well as the holding addresses, block explorers, Coinmarketcap.com and exchange APIs to create a unique report that breaks down all the crypto trading activity and presents it in a way that allows the accountant to prove the…
existence at EOFY
value at EOFY
income during the financial year
all trades & movements during the year
The report is complete but also all off exchange holdings can be confirmed by looking up the holding address on the accountant/auditors block explorer of choice and all on exchange holdings can be confirmed by the EOFY Report and/or the APIs. The API data can be reproduced using various software programs. New Brighton Capital has built their own CoinTracking software called CryptoTaxMate.
The address of a cryptocurrency is like the account number. You can use a blockchain explorer with the address to see all the deposits and withdrawals of that account.
An airdrop is when coins are given out to people who already hold other different coins. For example if everyone who holds Coin A will automatically receive 5 units of Coin B. The objective is to get the users of one coin to automatically be involved in the new coin’s community as they are given coins that could be worth a lot more in the future. For tax purposes airdropped coins are considered to have been acquired for zero cost and tax is only payable once the new coins are disposed of.
An altcoin or “alternative coin” is any coin other that bitcoin.
API stands for Application Program Interface and is used to pull data from other applications. New Brighton Capital uses APIs to receive trading history data from the exchanges clients trade on.
A blockchain in a “chain of blocks” where each block is a list of the balances of the all the accounts for that coin at a point in the past. Blocks are broadcast to the network every so often (on average 10 mins with bitcoin). The latest block is the current state of the network but you can use blockchain explorers to look back at the state of the blockchain at any time in the past.
Blockchain explorers are used to see the details of crypto accounts or specific transactions. You can use blockchain explorers to prove the existence of coins in an account at a certain time (for example EOFY). You can also trace transactions to see where the coins in an account came from (all the way back to the start of the blockchain) and where they went (all the way up to now). The main
A chain split is a fork (see fork)
A DeFi platform is a “decentralised finance” platform. These are online businesses that match lenders and borrowers of crypto currency. SMSF clients might use DeFi platforms (like BlockFi) to lend out their cryptocurrency and earn interest on it. The interest earned is paid out weekly or monthly. The AUD value of the interest earned is counted as income for the SMSF.
Ethereum (ETH) is one of the most popular cryptocurrencies. Ethereum is a cryptocurrency but also a platform that allows users to build and launch other coins that run on the Ethereum network. These coins that run on the Ethereum network (other than ethereum-ETH) are called ERC20 tokens. This is useful because instead of checking multiple different block explorers for different coins, if a client has multiple ERC20 coins on the one address, you only need to check the 1 blockchain explorer for the 1 address.
A fork is when one coin splits into 2 coins. This occurs when there is a disagreement on the rules of running the software and one group runs one version of the software and another group runs a different version. In this case everyone who has one of the original coins now has one coin on each blockchain. Both coins will have value, generally one will be worth what the original coin was and the other will be a small fraction of the original. For tax purposes the value of the lesser priced coin is considered to have been acquired for zero cost and capital gains tax is only payable once the new coin is disposed of. You can look up the price of the coins on coinmarketcap.com.
A hardware wallet is a physical device that holds the private keys (the codes that give the holder the ability to spend the coins). Clients are encouraged to keep coins off exchanges and in hardware wallets. This means the codes to spend the coins are controlled by the client and there is less chance of the coins being confiscated or lost due to hacking.
A holding address is a cryptocurrency address used by the client to store coins off the exchange. We use blockchain explorers to verify that the coins were there EOFY and if they were not there the blockchain explorer can show where the coins were sent to.
Mining is the process of expending computational power to secure a blockchain. In return for dedicating computational power to secure the network, miners receive compensation in the way of newly minted coins and transaction fees. These new coins and transaction fees are mining rewards. The AUD value of the reward at the time of receiving it is counted as income for tax purposes.
The private key is the code that gives the holder access to and the ability to spend coins in an address.
The public address (or just address) can be thought of as the account number of your account or an email address. The public address is the address you send coins to, but it gives you no access to spend those coins. We use the public address to search on blockchain explorers to prove the existence of coins and track their movement.
The public key is a string of numbers and letters that allows you to see all the addresses that have been used under that one coin and that one account. The public key is useful when a hardware wallet is used and a different address is generated with each transaction. You see how to obtain your xpub key on a number of wallets here: https://blog.blockonomics.co/how-to-find-your-xpub-key-with-these-8-popular-bitcoin-wallets-ce8ea665ffdc
A software wallet is an online wallet that stores private keys (the codes that give the holder the ability to spend the coins). A software wallet is an online version of a hardware wallet (see hardware wallet). This means the codes to spend the coins are controlled by the client and not a third party like an exchange or a bank.