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Tax treatment of crypto-currencies in Australia

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Hi All

There is a lot of confusion in my circle of friends and colleagues about the tax treatment of digital assets in Australia. This confusion is mainly due to statements made on "https://www.ato.gov.au/General/Gen/Tax-treatment-of-crypto-currencies-in-Australia---specifically-bi..." and feedback from individual tax practicioners about the difference in investment and trading, holding periods and deductions.

 

Let's paint the following picture: An investor purchased digital assets over 12 months ago with the main intention to use the coins/currency as a private store of value. No trading or any other business of investment was done afterwards. Now, over one year after purchasing the assets, the investor wishes to dispose of the coins. As per above link from ATO: "If you have acquired bitcoin (or other digital assets) as an investment, but you are not carrying on a business of bitcoin investment, you will not be assessed on any profits resulting from the sale or allowed any deductions for any losses made". Given that the investor has used the digital assets as an investment (store of value) and has not been carrying on a business of investment, it is my understanding that the investor therefore would not be assessed on any profit/loss resulting from disposing of the digital assets.

 

Do you agree on this understanding?

 

Thanks,

 

Sven

1 ACCEPTED SOLUTION

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Most helpful response

Former Community Support

Replies 0

Hi @sventeichmann,

 

Thank you for your patience! We realise that it’s taken a long time to provide a response, and we apologise for the delay.

 

Cryptocurrencies are not considered to be money or currency. Instead, they’re usually treated as assets for capital gains tax (CGT) purposes, and CGT will apply when you dispose of these assets.

 

You may have heard about the exemption for ‘personal use assets’. This exemption only applies in limited circumstances. If you purchase cryptocurrency to purchase items for personal use or consumption, it’s considered to be a personal use asset.  In general terms, if you have a digital wallet containing cryptocurrency of less than $10,000, and you use your cryptocurrency to purchase items for personal consumption, CGT will not apply.

 

Cryptocurrency is not a personal use asset if it is acquired, kept or used:

  • as an investment
  • in a profit-making scheme
  • in the course of carrying on a business.

You can find examples that demonstrate personal use in our guide on taxation of cryptocurrencies.

2 REPLIES 2

Former Community Support

Replies 0

Hi @sventeichmann,

 

Thanks for sending your questions through! We're working with a specialist area to get a more detailed answer for you.

 

Our offices will be closed from tomorrow until Tuesday 2 January 2018. We're planning to have more info for you once we get back.

 

Thank you so much for being patient. Have a happy holiday and a safe new year!

 

Most helpful response

Former Community Support

Replies 0

Hi @sventeichmann,

 

Thank you for your patience! We realise that it’s taken a long time to provide a response, and we apologise for the delay.

 

Cryptocurrencies are not considered to be money or currency. Instead, they’re usually treated as assets for capital gains tax (CGT) purposes, and CGT will apply when you dispose of these assets.

 

You may have heard about the exemption for ‘personal use assets’. This exemption only applies in limited circumstances. If you purchase cryptocurrency to purchase items for personal use or consumption, it’s considered to be a personal use asset.  In general terms, if you have a digital wallet containing cryptocurrency of less than $10,000, and you use your cryptocurrency to purchase items for personal consumption, CGT will not apply.

 

Cryptocurrency is not a personal use asset if it is acquired, kept or used:

  • as an investment
  • in a profit-making scheme
  • in the course of carrying on a business.

You can find examples that demonstrate personal use in our guide on taxation of cryptocurrencies.