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Newbie

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Replies 7

Here is my situation,

 

years ago I came across bitcoin. I thought it was an interesting idea so I purchased a bit over $40 of it. The reason I bought it was primarily to simply be part of the story of its success or failure. I thought that having a few dollars worth of it would make learning about it more fun. I also purchased it with the intent of trying it out - to buy something online. After a month or two it was apparent that very few places would accept bitcoin, and the software was fairly hard to use, so I forgot about it except when various exchanges were hacked and I wondered if the Russian mafia had stolen my coins Smiley Happy

 

now several years have passed. Seeing that it was worth a bit, I managed to dig up the software, and with a lot of fuss, I managed to access my old coins. I sold them for a lot, for more than 100,000!

 

Tax time is coming - and I’m wondering whether my profits are capital gains taxable. I actually don’t mind paying CGT if I should - taxes are important, and it is all kind of free money after all. But on the other hand, it really would be a stretch to say they were bought as an investment - who invests $40 in something? Not me anyway, I have no shares or other investments aside from savings. I have a normal job - and I know nothing about running a business of investment.

 

so, I have been level about how and why I acquired these coins. What do people think? Capital gains or personal use asset? Thanks very much for your time!

7 REPLIES 7

Megastar

Replies 3

Ok. I am not a tax expert so take my advice with a grain of salt.

 

My understanding is if you sold the Bitcoin for cash then it would not qualify as a personal use asset and CGT would apply. It would only be a personal use asset if you had used the Bitcoin to purchase personal use goods directly (i.e. not converting to fiat money first).

 

If you held the Bitcoin for more than 12 months, however, you should be able to claim the 50% CGT discount.

Newbie

Replies 2

I definitely sold them for cash - thanks for your clear explanation of how it works.

Devotee

Replies 1

Please don't take it as final that because they were sold for cash that CGT is payable.  I don't believe that this is true at all.  The personal use asset rule is generic to all personal use items and those can be sold for cash without incurring CGT.  Consider buying a boat for $9000 and selling it for $12000.  No CGT is payable here as it is a personal use item that was bought for under $10k.  If you genuinely bought bitcoin for personal use and can persaude the ATO of this, then selling that bitcoin later shouldn't be subject to CGT.  Of course the hard part there is persuading the ATO that you bought it only for personal use and not financial gain, and for that you will likely need to seek the advice of an accountant and probably obtain a private rulung.  

Megastar

Replies 0


@paulscreenwrote:

Please don't take it as final that because they were sold for cash that CGT is payable.  I don't believe that this is true at all.  The personal use asset rule is generic to all personal use items and those can be sold for cash without incurring CGT.


From what I've read and from advice I've received on this forum I am pretty sure the ATO would regard sale of crypto for cash as NOT a personal use asset, regardless of why it was acquired. Also, they seem to have just updated their knowledge base on this at https://community.ato.gov.au/t5/General-tax/Can-cryptocurrency-be-a-personal-use-asset/ta-p/3393 which now includes the statement:

 

"If you buy and use cryptocurrency solely to purchase goods and services for personal needs (such as clothing or music), the cryptocurrency will be a personal use asset."

 

Consider buying a boat for $9000 and selling it for $12000.  No CGT is payable here as it is a personal use item that was bought for under $10k.

There is a difference here. A boat is meant to be sailed. For it to qualify as a personal use asset you would need to show that you have used it and not just held it in the hope its value would go up. Cryptocurrency is meant to be spent. If you can't show a pattern of spending it on personal use items (or for experimenting with the technology as another example) then how can it be a personal use asset?

 

If you genuinely bought bitcoin for personal use and can persaude the ATO of this, then selling that bitcoin later shouldn't be subject to CGT.  Of course the hard part there is persuading the ATO that you bought it only for personal use and not financial gain, and for that you will likely need to seek the advice of an accountant and probably obtain a private rulung.  

The problem is, if you could cash out crypto as a personal use asset, then practically every investor is going to try and argue that their holding is one to avoid paying CGT. They might even make a few small purchases on acquisition to "prove" their intention was to use it for purchases.

 

Now you *might* be able to make a case that if you cashed out specific amounts of crypto to fiat currency which was then immediately used to make purchases of personal use items that in that case it still is a personal use asset, but even that, I think, is a stretch.

Initiate

Replies 0

One of the major aims of cryptocurrencies is, of course, to replace cash as a means of payment. If you have been using Bitcoin to buy items for personal use, at that point the capital gains or losses that occur may be disregarded for purchases of up to $10,000. It would be advisable to keep receipts or proof of purchases in case the ATO comes calling.

If you acquired cryptocurrencies as an investment you will most likely have to pay tax on any capital gain made on the disposal of the asset. Tax agencies around the world keep applying pressure on bitcoin and crypto companies to make their operations transparent to them.

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Initiate

Replies 0

One of the major aims of cryptocurrencies is, of course, to replace cash as a means of payment. If you have been using Bitcoin to buy items for personal use, at that point the capital gains or losses that occur may be disregarded for purchases of up to $10,000. It would be advisable to keep receipts or proof of purchases in case the ATO comes calling.

If you acquired cryptocurrencies as an investment you will most likely have to pay tax on any capital gain made on the disposal of the asset. Tax agencies around the world keep applying pressure on bitcoin and crypto companies to make their operations transparent to them.

Initiate

Replies 0

One of the major aims of cryptocurrencies is obviously to replace cash as a means of payment. Please update with the latest Bitcoin News and other major cryptocurrencies. If you acquired cryptocurrencies as an investment you will most likely have to pay tax on any capital gain made on the disposal of the asset. Tax agencies around the world keep applying pressure on bitcoin and crypto companies to make their operations transparent to them. If you want to stay up-to-date with the crypto trending news, then you must follow the news about the cryptocurrency news about the world's most popular virtual coins.

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