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Re: When is a legal tender not a legal tender?

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If I want to buy something (goods or services) that you offer for $1000 and I gift you $1000 cash and you gift me the Goods/services, is that still a LEGAL TENDER?

There is no CGT on Gold Australian coins if used as money in a legal tender - so it seems. But a $25 1/4 oz Australian gold coin is worth about $500 in bullion spot price. So using a $25 gold coin to pay for a $25 meal just to avoid paying Capital gains tax is the definition of fools gold.

 

Similarly, if I exchange a $25 Australian Kangaroo gold coin (worth $500 in bullion spot price) for $500 in legal tender paper/plastic Notes - is that a legal tender transaction? . Because: 

Taxation Determination TD 2002/25 asks: 

 

is Australian currency a CGT asset under section 108-5 of the Income Tax Assessment Act 1997 (ITAA 1997) if it is used as legal tender to facilitate a transaction? 

And then says: 

1. No. Australian currency, being Australian notes issued by the Reserve Bank of Australia

    or Australian coins issued on the authority of the Federal Treasurer, is not a CGT asset under 

   section 108-5 of the ITAA 1997 when it is used as legal tender. In this circumstance, Australia

    currency serves as a medium of exchange to facilitate a transaction.
2. Accordingly, no capital gain or capital loss arises from Australian currency when it is used as legal

    tender.  

3. Grant pays $10,000 in Australian notes to purchase a painting from Debbie. The tendering of the  

    notes is a legal tender that facilitates the sale/purchase of the painting. The tendered notes would

    not be CGT assets. Grant will not make a capital gain or capital loss from the notes.

4. This Determination does not deal with the question whether Australian currency is a CGT

    asset in other circumstances. ....(So what other circumstances do avoid CGT?)

 

And  Currency Act 1965  says:

16 Legal tender
(1) A tender of payment of money is a legal tender if it is made in coins that are made and issued under this Act and are of current weight:

(d) in the case of coins of the denomination of Ten dollars—for payment of an amount not exceeding $100 but for no greater amount; and (and what does "but for no greater amount" mean or imply? Or is it just bad grammar -repetition?)
(e) in the case of coins of another denomination—for payment of any amount. 

 

So, is the exchange of a $25 Australian bullion gold Kangaroo coin for $500 of legal tender Australian Notes also the use of the coin to serve as a medium of exchange to facilitate a  transaction? And render said $25 gold coin CGT FREE?

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Hi @TomTom,

 

As we've explained previously, we can help you find general information; however, if you're seeking an interpretation of existing legislation and whether your suggested scenario is allowable, you'll need to apply for a private ruling.

 

Thanks,

@AmandaE
Community moderator.

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Hi @TomTom,

 

As we've explained previously, we can help you find general information; however, if you're seeking an interpretation of existing legislation and whether your suggested scenario is allowable, you'll need to apply for a private ruling.

 

Thanks,

@AmandaE
Community moderator.

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Thankyou for the reply re: Legal tender.

Sorry for this reply being so late. I lost track of it.

 

To recap, I am asking detailed questions about Legal tender bullion coins And you can only supply general info. So you suggest I seek a private ruling? But if my questions (if put in an application for a personal ruling) are hypothetical, and/or a private ruling is not possible or not applicable, do you advise another way to discover how the tax laws apply to my questions? Because if a Private ruling application is impossible or inapplicable, and so the ATO is unable to answer my questions, then will I be subject to penalty should I make my own interpretaion(s), in good faith, that enventually get over-ruled?

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Hi @TomTom,

 

Our response to your other query on What exactly is a Legal Tender transaction may assist with this query.

 

Thanks, JodieH.

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