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Personal use asset

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Initiate

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I notice discussions about using crypto for "personal use asset" purchases and a limit of $10,000 per transaction which would not be subject to CGT. My question is how many such transactions can occur in any tax year and still be treated as personal use and therefore not be subject to CGT? Taking this further, would it be feasible to purchase a house, sell $10,000 worth of crypto each month to pay down the mortgage and still not be subject to GCT? 

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Taxicorn

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@DDZ 

 

CGT event when they dispose of the Crypto not when they acquire it.

Cost base will be value when they acquired it not $0.

 

After 12 months 50% discount, unless they are seen to be in business.

 

 

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Taxicorn

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@DDZ 

 

Doesn't quite work that way and if you did do that you would most certainly be audited.

 

The "$10,000" Personal use asset is a very rarely allowed as it is very difficult to prove that your intention was to NOT make a profit.

 

All of the following criteria must be met:

  1. Your intention at the time of acquisition is for personal use (no profit-motive);
  2. Whilst holding the cryptocurrency it remains your intention to use it for personal use (no profit-motive);
  3. You dispose of the cryptocurrency for personal use; and
  4. The cryptocurrency cost $10,000 or less when acquired.

It's very difficult to meet the criteria because you need to show you had basically no intention of holding the cryptocurrency as an investment.

The ATO have said their default position when considering circumstances where a person has held cryptocurrency for a number of years will be to treat any gain as a taxable capital gain not eligible for the personal use exemption. As a result, if you cannot demonstrate actual personal use with evidence, then it will be difficult to convince the ATO that your cryptocurrency gains are tax-free.

Initiate

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Thanks for your detailed explanation. I now have a better understanding of how it works. As one of the criteria being "the cryptocurrency cost $10,000 or less when acquired", what if the crypto was acquired for zero cost? This brings me to 2 more questions if I may:

 

I know somebody who has been offered a position on the board of an ICO and will receive some "free issue" crypto. It will be available to him after twelve months of escrow. Then he can spend it or cash it out to fiat or whatever. 

 

1. Is there a CGT (or income) event at the time that the crypto is issued (free) to him or only when he spends/disposes of it?

2. Assuming there is a CGT event at the time he spends it, and the crypto has been held in escrow for twelve months, would the CGT be calculated on 100% or 50% of the value of the transaction? Thanks again for your help.

 

Most helpful response

Taxicorn

Replies 1

@DDZ 

 

CGT event when they dispose of the Crypto not when they acquire it.

Cost base will be value when they acquired it not $0.

 

After 12 months 50% discount, unless they are seen to be in business.

 

 

Community Moderator

Replies 0

Hi @DDZ,

 

The example that you have provided doesn't sound like it would fit the personal asset criteria. I would suggest contacting our early engagement area.

 

Thanks

 

KylieS