Quick answer

Portfolio reconciliation ensures your tax software's view of your holdings matches what's actually in your wallets.

Understanding Portfolio Reconciliation on crypto

Portfolio reconciliation is the process of verifying that all on-chain and exchange transactions have been captured correctly in a tax calculation, and that the resulting token balances match actual wallet and exchange holdings. It involves importing data from all sources (exchanges, wallets, DeFi protocols), categorising transactions, resolving discrepancies between expected and actual balances, and confirming that the complete transaction history is accurate. Unexplained balance discrepancies indicate missing transactions — typically transfers between wallets, DeFi interactions, or income events not captured in exchange exports.

What this means for your crypto activity

Inaccurate reports

Unreconciled portfolios produce inaccurate tax reports — potentially understating income or miscalculating gains.

Resolve discrepancies

Balance discrepancies must be investigated and resolved before filing.

DeFi complexity

DeFi users often have the most complex reconciliation challenges due to protocol interactions and reward accruals.

All wallet addresses

Self-custody wallet users must import all wallet addresses — not just the ones used for exchange withdrawals.

Defensible returns

A reconciled portfolio is the gold standard starting point for a defensible tax return.

Unreconciled portfolios produce inaccurate tax reports — potentially understating income or miscalculating gains.
Balance discrepancies must be investigated and resolved before filing.
DeFi users often have the most complex reconciliation challenges due to protocol interactions and reward accruals.
Self-custody wallet users must import all wallet addresses — not just the ones used for exchange withdrawals.
A reconciled portfolio is the gold standard starting point for a defensible tax return.

Seeing it in action

Example scenario

After importing 2 years of data into KoinX, Ben's ETH balance shows 1.5 ETH but his actual MetaMask balance is 1.8 ETH. The 0.3 ETH discrepancy indicates missing transactions. He investigates and finds two DeFi withdrawals and one staking reward distribution not captured in his import. Adding these transactions clears the discrepancy and his reconciliation report shows zero balance errors.

How this works across jurisdictions

Australia