Announcements
We’re in read-only mode while we do some scheduled maintenance to bring you a bigger, better and brighter online community.
You can still search the site to find answers or take a look at our current top 10 questions.

ATO Community

ERC 721 tokens - Crypto Collectables more questions specifically PUA Exemption

Devotee Registered Tax Practitioner

Views 2477

Replies 5

Joe buys ERC 721 that are associated with an online game that he plays each token costs between $20-$100 and Joe has 25 different tokens he utilisesin the game  he plays lets call it cryptoelephants for the sake of the example.

 

After 12 months Joe tires of the game and decides to sell his tokens in an online market place because of the rarity of some of the tokens he owns his 25 tokens sell for $500,000 does the personal use asset exemption apply to Joe

1 ACCEPTED SOLUTION

Accepted Solutions

Most helpful response

Former Community Support

Replies 0

Hi @DanielH,

 

Sorry for the delay in our response.

 

We'd encourage you to contact our early engagement teamfor assistance with this one - we'd need more information from you so we can consider how we think tax law would apply in this situation. You can request a call back request or follow up email by completing the online form on our website.

 

Thanks.

 

 

5 REPLIES 5

Devotee

Replies 3

well the kitties are also represented as tokens on the ethereum blockchain, they just have individual unique value... in that the unique code for each unique token is interpreted as a genome and is represented as a unique avatar configuration, but at the heart the asset is a token, which we could call 'kitty tokens' they just happen to be only sold on one exchange for a price. the game is really breeding rarity so it is a profit making game... and the breeding and selling gas+fee costs would deduct from the profit/add to the cost base.

I don't think that because units in a currency called kitty/elephant tokens, have aesthetic and thus subjective value this makes them any less a crypto-currency. also you can send these tokens using myetherwallet directly and do private sales.

I think it would have to be more complex to be called a 'game' for the sake of being for personal use. the main issue is in interpreting the blockchain info to get historical buys/sells and breeding/multiplying tokens.

breeding one kitty with another kitty / tokens.... to form a new token splice of the two, would really just be considered POI, proof of investment mining... where you pay to generate a new token for the chance it has rare attributes. it is like proof of stake but they only stake for a fee Smiley Tongue the breeding fee would add to the cost base of the new token and also the old tokens would be depreciated as they now become slower at breeding... but I guess the game here is just choice in how you play with your assets and the chances you make.

is gambling with cryptocurrency a personal use case? because that is kinda similar.

also the personal use exemption only covers 10K AUD, so in your case it wouldn't help much.

Devotee Registered Tax Practitioner

Replies 2

two points

1. PUAE applies to the cost base of the asset sale proceeds are irrelevant

2. I believe there are two seperate catergories in the ERC 721 space yes trading with the intention to make profit CGT applies however I'm not so convinced where someone utilises the token for the primary purpose of game play lets move away from the cryptokittties and a like example and look at Gods Unchained a Magic the gathering style card game which the cards are utilsed in game play there are gaming tournaments like magic the gathering but run online. When i break down the logical process its more like a game based  collectable like magic the gathering cards ( remember some Magic the Gathering Cards have also sold for six figure sums). The primary purpose here is personal utilisation and enjoyment of the asset to play the game, the cost base of the token is well under  $10,000 I'm pretty convinced the PUAE is arguable in such circumstances

Newbie

Replies 1

Hi DanielH's, not sure if this appropiate, could I use you as my Tax agent? Unable to message you otherwise. Thanks.

Devotee Registered Tax Practitioner

Replies 0

I believe I am not allowed to provide details on here although I do appreciate the request possibly searching cryptocurrency taxation and my name and initial on facebook or linkedin you may come across me

Most helpful response

Former Community Support

Replies 0

Hi @DanielH,

 

Sorry for the delay in our response.

 

We'd encourage you to contact our early engagement teamfor assistance with this one - we'd need more information from you so we can consider how we think tax law would apply in this situation. You can request a call back request or follow up email by completing the online form on our website.

 

Thanks.