You can select which inventory method for which you would like use when calculating the tax reports:

We have a number of different inventory methods from which you can select. The "First In First Out" is the most common option, however, in countries such as the UK and Canada, we have country-specific inventory methods to handle their unique reporting requirements. More details for the UK can be found here, and for Canada can be found here.

We also have the option for "Last In First Out", "Highest In First Out", "Most Tax Effective" and "Average Cost" however, you need to check with your accountant if you are able to use these methods.

In general, it is advised to keep the same inventory methods across the different tax years for which you generate reports. As such, if you decided to change your inventory method, please note that this will apply to all years for which the reports are generated.

Examples detailing the difference between the First in First Out, Last in First Out, Highest in First Out, Most Tax Effective and Average Cost inventory methods are shown below:

In the above example we sell our first purchase of BTC (purchased on 1st Jan) with a cost basis of $3,000, leading to a gain of $1,500.

In the above example we sell our last purchase of BTC (purchased on 4th Jun) with a cost basis of $2,000, leading to a gain of $2,500.

In the above example we sell our highest priced purchase of BTC (purchased on 3rd Feb) with a cost basis of $6,000, leading to a loss of $1,500.

Using the Most Tax Effective inventory method, when handling the disposal of an asset we match acquisitions of the asset prioritizing those which would lead to losses first, then gains. The exact categories are below:

Within these categories we will always prefer acquisitions with higher prices as they will lead to larger losses or smaller gains. This inventory method allows short term gains to mature into long term gains, leading to you paying less tax in the long run.

In the above example we sell a BTC that is assigned the average cost basis of the 3 previous buys. This is calculated by adding the cost basis of each BTC (12,000) and then dividing by the number of BTC held (11,000 ÷ 3) to give a cost basis of (3,666.67). When sold for 4,500, the gain on this BTC is 833.33.