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Re: Cryptocurrency: Using cyrptocurrency gains to buy a house/buy personal products

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One point I think should be raised and determined if it hasn’t already is the boundaries around the $10,000.

“Per purchase of the Crptocurrency”? Seems a tempting flag to avoidance?

“Per tax year”?
Seems better?


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Thank you all for your replies.


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I kinda get a bit of confusion here around 'if I sell my BTC for AUD -- and then buy .et cetera'... it doesn't matter if you buy a house, pony, lambo, pikachu, holiday, medicine, massage, jar for tears with your AUD... as soon as you sold your BTC that was a disposal and you were either a hobby or business trader.. or investor if you held it for more then 12months prior.

buying crypto to use on personal use items applies if you directly trade your BTC for a house, pony, jar for tears. and once you have traded more than 10k worth of crypto for personal use items, the exceptions runs out.

that's my understanding anyway.


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No expert ...

Did I make, own, buy, sell, swap, or use to buy something else or get paid by someone for something else crypto currency in the year?

Am I in business? Use the business rules.
Am I trying to make a profit? Use the commercial intent rules.
Else use the Personal Use Asset rules.

It’s been a while since I reviewed the topic but if not that is a likely structure for all this I would consider.

In terms of a personal situation the private ruling path would give your certainty.

Another approach if it is not clear is to calculate your tax obligations with all possible treatments. If one approach sees you paying the most tax then it’s unlikely you’d get complaints from the ATO on choosing it, because at worste you would get a refund when audited? If they all give the same result then throw a dart?

That’s probably a more practical methodology than a legal methodology but in the end it all depends on how much you’re talking.

If there is more money involved then pay for advice?


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Hi @treefairy and @Jack1


Thanks for your comments. We've recently updated our knowledge base article Can cryptocurrency be a personal use asset? to provide a simpler explanation with some handy examples to demonstrate when the 'personal use asset' exemption can be used. 


There are limited situations where you can claim this exemption - cryptocurrency is really only a personal use asset when you acquire it to make personal purchases. If you were to buy, say, $2000 of cryptocurrency in order to purchase concert tickets or parts for your computer, this would be considered to be personal use and you'd be exempt from the CGT on that transaction. 


If you bought $2000 of Bitcoin in order to acquire different kinds of cryptocurrency, then hold on to all of your cryptocurrency to see how the market goes, you're considered to be an investor even though your transaction originally cost less than $10,000. When you purchased the Bitcoin, you had already made a decision to use this amount to earn assessable income. Your cryptocurrency is considered to be a capital asset, and CGT will apply each time you dispose of it. 


One final point is that 'disposal' does not mean 'sell', and that the market value substitution rule may apply when you dispose of a capital asset. If you're considered to be an investor for CGT purposes, and you trade your bitcoin for something else - whether it be a house, Lambo or jar of tears - you're still taken to have accepted the market value of the cryptocurrency in exchange for the item. This means that if you use $50,000 worth of bitcoin to purchase a Lamborghini, even if you don't cash out into fiat, you're considered to have disposed of $50,000 worth of a capital asset and you'll need calculate any capital gain or loss on the transaction. 


This rule also applies if you give your crypto to someone as a gift


Hope that helps!

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