Your latest cryptocurrency questions (19 to 31 January)

[#1]

Happy Wednesday!

Thanks to everyone for continuing to share your thoughts and questions on how tax applies to cryptocurrency transactions. Since our last update, you’ve asked us:

• How we define a ‘personal use asset’
• How you report and pay tax when trading between cryptocurrencies
• What transaction records you need to keep for tax purposes
• When you can use bitcoin to purchase capital assets (e.g. property)
• How tax applies when you use bitcoin as a long term investment

We’re collecting all your questions and working with tax and cryptocurrency experts in the ATO to get answers you can rely upon when making decisions about your investments. If you need really specific information, or you’re seeking urgent advice, visit our website or contact our early engagement team to discuss your situation.

Keep an eye on our Cryptocurrency board for updates, or select ‘Subscribe to RSS feed’ in Topic options at the top of the post you’re interested in for email alerts.

[#2]

Hi Amanda 

I'm a tax agent with a strong focus on cryptocurrency. My facebook page which deals directly with cryptocurrency taxation advice has close to 1000 followers and as such I also have a myriad of clients involved in cryptocurrency in a number of ways. As such I'd like to become very active in raising issues and seeking clarification with the ATO. Does the ATO have a PR divison where I could possibly do a direct interview(s) with someone and upload it to youtube around the tax offices views on cryptocurrency. As you can tell from the volume of question there are a huge number of confused investors out there at this stage and while I spend a few hours most days pointing people in the right direction simply because I understand their frustration at the lack of clarification to date I do however appreciate the great work you are doing with this community portal 

[#3]

I run a crypto business and get never ending questions about this paragraph in the ATO tax treatment guidance:

"Where you use bitcoin to purchase goods or services for personal use or consumption, any capital gain or loss from disposal of the bitcoin will be disregarded (as a personal use asset) provided the cost of the bitcoin is $10,000 or less."

What does that actually mean in practical terms? It seems very open to interpretation.

[#4 · Accepted solution]

Hi @thursday,

Thanks for your post.

The statement about personal use assets you mentioned in your post is only intended to apply to bitcoin used solely as ‘currency’ to purchase personal items - for example, where you acquire bitcoin in order to pay for goods or services. 

The personal use assets exemption from CGT does not apply where someone has used their cryptocurrency in some way to increase the value of their cryptocurrency balance (i.e. by speculating in the market). The CGT exemption can only apply on the disposal of a cryptocurrency asset whose cost was less than $ 10,000.

You might find our knowledge base article about personal use asset exemption useful – check it out here.

Thanks.

[#5]

Actually that does help! Thankyou.

"if you do make a capital gain from a cryptocurrency that is a personal use asset, the capital gain is still only disregarded if the cost you incurred in order to acquire the cryptocurrency is $10,000 or less" 

That "$10,000" figure has caused the most confusion amongst people I talk to. $10,000 per Bitcoin? $10,000 per year in total? $10,000 per transaction?

To summarize, would I be right in saying that the Bitcoin must firstly be considered a "personal use asset" which means you did not intend to make a profit from it when you bought it (wow that's going to be hard to prove!). And secondly, you must have spent less than $10,000 in total on the original amount of Bitcoin that you are a claiming a capital gains tax exemption from. This value could have risen to $10,000,000 by now, but as long as you spent less than $10,000 AUD on it originally, and did not intend to make a profit, it is CGT free.

[#6]

Can you advise an estimated timeframe of when the answers to these questions will be available ? 

[#7]

Hi there,

can someone from the ato make it clear and answer this question:

• How you report and pay tax when trading between cryptocurrencies

someone else asked this:

1) What are my record keeping requirements? If i use 'bot' software to do the trading automatically - there may be potentially thousands of transactions a week.

2) Do i need to pay CGT on each transaction (eg From Bitcoin to Etherium and then back to Bitcoin) or only once the bitcoin is exchanged back to AUD?

3) If i increase the amount of bitcoin i hold (either through trading as mentioned above or simply purchase more) but hold the bitcoin for a number of years, at what point am i required to pay tax on it? 

can someone from the ato answer all these questions?

thanks