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Ethereum personal use asset

Megastar

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Replies 1

Hi,

 

In June 2016 I purchased $1000 of Ethereum (a cryptocurrency similar to Bitcoin) out of an interest in the technology and in order to learn about cryptocurrencies and specifically the smart contracts that the Ethereum platform supports.

 

I have used about 10% of it experimenting with the Ethereum platform and on some small purchases on the internet. However, the value of Ethereum has subsequently increased substantially since purchase and at current prices the remainder is now worth over $50,000.

 

My questions are:

1) Does this qualify as a personal use asset, given that the cost was < $10000?

2) If so, what methods of disposal are acceptable for purchasing goods for personal use:

  a) Direct purchase in the Ether currency (i.e. Only from vendors who accept Ether as payment).

  b) Through a bill payment service like "Living Room of Satoshi".

  c) Converting the Ether to fiat AUD currency on an exchange and then immediately using the cash to make the purchase.

3) If I were to convert the remaining Ether entirely to fiat AUD currency what are the tax implications?

 

I have read the ATO guidance paper on cryptocurrencies but it seems to be very ambiguous on what actually constitutes a personal use asset and the suitable methods of disposal of such an asset. Unfortunately there also seems to be contradictory advice from tax professionals and even ATO staff on how this should be handled.

 

I'm sure many people would benefit from the answers to these questions as there are no doubt others who are in a similar situation.

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Accepted Solutions

Most helpful response

Former Community Support

Replies 0

Hi @SetiMaster,


Thank you for your patience while we worked through our backlog of cryptocurrency questions. We’ve tried to answer your questions in the dot points below:

  1. Based on the information you’ve provided, your cryptocurrency investment doesn’t qualify for the personal use asset exemption. As well as meeting the $10,000 cost requirement, the asset you’ve disposed of has to be a personal use asset. In your case, although have acted out of ‘interest’, your activities are commercially indistinguishable from any investor in cryptocurrency. Personal use generally involves obtaining personal benefits.
  2. The method of payment is not directly relevant. As long as cryptocurrency is acquired solely for the purpose of disposing of it in order to obtain personal goods or services, then the form of payment does not change the character of the asset being personally used.
  3. This would constitute CGT events occurring where the personal use asset exemption does not apply. CGT is calculated by reference to the cost of the cryptocurrency compared to the AUD received.

Thanks.

1 REPLY 1

Most helpful response

Former Community Support

Replies 0

Hi @SetiMaster,


Thank you for your patience while we worked through our backlog of cryptocurrency questions. We’ve tried to answer your questions in the dot points below:

  1. Based on the information you’ve provided, your cryptocurrency investment doesn’t qualify for the personal use asset exemption. As well as meeting the $10,000 cost requirement, the asset you’ve disposed of has to be a personal use asset. In your case, although have acted out of ‘interest’, your activities are commercially indistinguishable from any investor in cryptocurrency. Personal use generally involves obtaining personal benefits.
  2. The method of payment is not directly relevant. As long as cryptocurrency is acquired solely for the purpose of disposing of it in order to obtain personal goods or services, then the form of payment does not change the character of the asset being personally used.
  3. This would constitute CGT events occurring where the personal use asset exemption does not apply. CGT is calculated by reference to the cost of the cryptocurrency compared to the AUD received.

Thanks.