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Personal use bitcoin under $10k

Initiate

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Replies 5

Hi, 

I bought two lots of bitcoins in FY18

1. Approx $332 worth to buy drugs. So AUD > Bitcoin > drugs. Pretty sure its classed as personal use coz i didn't convert the bitcoin back to AUD. 


2. Approx $2.1k worth of bitcoins to buy drugs. I then realised my silliness and sold the bitcoin on the sameday for $2.06k, a loss of -$38.

Though apparently for the total of that financial year my total gain was $37. which was left as bitcoin and has been sitting in my account except to purchase a Bitcoin priced VPN subscription in FY19. 

Do i need to report the $37 gain despite the fact bitcoin was used for personal consumption? 

Thanks 

 

chugs

 

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Taxicorn

Replies 2

@chugs 

 

I presume that you meant medication.

 

It doesn't need to be converted back to $AU to be considered non-personal.

 

If your intention was to use it, within a relatively short period of time to acquire personal stuff then there is no Capital Gains/loss.

However, if you held it for a while and it accumulated/decreased in value then there may be Capital Gains/Losses reportability.

 

When working out your gain have you included all buying/selling costs?

If held longer than 12 months there would be a 50% discount.

For such a small amount I would definitely report it just in case.

 

5 REPLIES 5

Most helpful response

Taxicorn

Replies 2

@chugs 

 

I presume that you meant medication.

 

It doesn't need to be converted back to $AU to be considered non-personal.

 

If your intention was to use it, within a relatively short period of time to acquire personal stuff then there is no Capital Gains/loss.

However, if you held it for a while and it accumulated/decreased in value then there may be Capital Gains/Losses reportability.

 

When working out your gain have you included all buying/selling costs?

If held longer than 12 months there would be a 50% discount.

For such a small amount I would definitely report it just in case.

 

Initiate

Replies 1

No it was narcotics but i'm on a program so its not like the government isn't aware of it. 

 

Nonetheless the bitcoin was usually held for no more then 2-4 weeks (the several hundred dollars) whilst the $2.5k was held for less then several hours. 

Since its clear that i have no CGT liablity what would be the possible consequences if i don't report it? Or is owning bitcoin tandamount to tax evasion and i'll be short listed for a review simply for owning BTC? 

 

I was really hoping not to have to post any any CGT as i find it exceedingly confusing and complex. The wording is just nonensical in parts.I do increadibly complex analysis work in my sector and yet i find ATO's tax submission forms and language to be so dense and incomprehensible that its impossible to lodge straight forward transactions. 

Like the "are you an Australian citizen for tax purposes" re question 1 does my head in each and everytime. All they have to do is change this to 

1. Were you an Australian citizen for FY20 (or part thereof)?

Instead they have to post an increadibly confusing question. Its not like we submit tax every week. It's something we do once a year and yet expectation is that we know and understand the several tomes of increadibly complex tax law and information. 




Taxicorn

Replies 0

@chugs 

 

1. No I have NEVER been an Australian Citizen, I am a UK citizen who has lived here for over 40 years therefore I am an Australian RESIDENT for tax purposes...

 

Yes it can get confusing and open to interpretation.

 

I teach Tax and almost 1/3 of very intelligent people give up after a few weeks.

 

Devotee

Replies 1

Simple answer, personal use disposal occurs if you exchanged the cryptocurrency you bought for the drugs, not the money you got from buying and selling cryptocurrency for what ever you intend to use the money for. But if you then sold the drugs, for more money than you bought the cryptocurrency for originally... you'd still need to report the gain of income.

So you need to clarify what you're saying and considering as your sentences didn't make sense in terms of accounting for numbers. Based on what you said... you didn't have a capital gain you had a capital loss for instance 2.

 

For instance 1 the value of the drugs is assumed to be the cost of the crypto, so there is no capital gain and personal use seems to apply. (i'm no accountant). The medical costs for the OD, are not a deduction as this isn't a capital gains business event, it is a personal use scenario, so you might want to consider that too.

If you bought bitcoin, sold it for ethereum, then exchanged the ethereum for drugs.
You would have 1. Cost base of AUD to bitcoin CGT event cost base. 2. Cost base BTC vs. value ETH exchanged for... Captial Gain if ETH = AUD more than BTC cost. or Capital Loss if ETH = AUD less than BTC cost (date time relevant). But then the ETH to Drug is not a disposal of Eth for an asset for the seeking of profit, if personal use.

IF... again you sell the Legal Drug, Legally... then you will be Legally declaring this income you make. If you illegally sell illegal drug and then legally declare the income, you have conflicting morals based on the social norms of law... but are doing something LESS illegal I believe, as you are atleast declaring the money as income.

althought now that I think about it...the ATO probably doesn't want taxable income on their book for something not legally sound, i'm guessing. I don't have any experience in any of these areas XD

Devotee

Replies 0

Ok I read your next post OP.

Having Bitcoin does not flag you for CGT reporting needed... but disposing of that Bitcoin for Cryptocurrency or Money, does.

And all you do is you go... how much I pay for this Bitcoin originally? Check bank or coinbase or what ever.
Add every purchase up at AUD cost.

Then ... it gets complicated lol with the first purchase in, out or last purchase in is the one that gets sold out.

But I think.. lol... you'd just go 'how much bitcoin did I sell for AUD'.... oh it was MORE money than I spent.. imma declare that as CGT. 

Welp i'm tapping out I got bored, but just try simplify it for yourself... and just try be able to validate your working out simply.

The many options makes it feel complex, but if you choose the one best of you to your understanding and knowledge that's all you can do... they don't want it to do your head in, they just want to know if you made m o n e y.

If you didn't make money that year... then sure you have CGT events, but will they have eventuated to tax.... erm I guess not... CGT confuses me, I prefer income tax lol. I'm guessing the answer is 'on an event by event basis, maybe you made money... and if you want to carry on this business you can register an ABN and make it easier for yourself by considering your assets stock'.

Anyway in your case it sounds like 1. personal use and you;re being honest so they won't grill you. 2. you made a capital loss. 

2b. but it sounds like you have left over crypto.. so just average it out... if you bought 1 btc.... for 1000AUD, sold 0.8 ... for 1000AUD in da bankawitz. then you made a profit of the difference between 1 and 0.8... even though it only becomes income when you sell the .2 btc... the sale of the 0.8 event has the profit... so you just figure out what 0.8 btc cost when you bought the OG 1 btc. which is 800 shmeckledons, so your cgt is for the 200 schmooples.