Do you have to declare bitcoin if it was just for your own personal use? If the bitcoin you bought for personal use cost more than $10,000 do you have to declare it and is it taxed? And at what rate?
Cryptocurrency is considered to be a capital asset for tax purposes rather than a form of currency. This means that most of the time, when you dispose of cryptocurrency (by trading, selling or gifting) you’ll need to work out if you have made a capital gain or loss.
However, you may be able to disregard capital gains tax on certain capital assets that cost less than $10,000 and are for your personal use.
If you buy and use cryptocurrency solely to purchase goods or services (like to buy clothing or music), the cryptocurrency is usually considered to be a personal use asset.
Example : Personal use
Michael wants to attend a concert. The concert provider offers discounted ticket prices for payments made in cryptocurrency. Michael pays $270 to acquire cryptocurrency and uses the cryptocurrency to pay for the tickets on the same day. Having regard to the circumstances in which Michael acquired and used the cryptocurrency, the cryptocurrency is a personal use asset.
Example : Investment
Peter has been regularly keeping cryptocurrency for over six months with the intention of selling at a favourable exchange rate. He has decided to buy some goods and services directly with some of his cryptocurrency. Because Peter used the cryptocurrency as an investment, the cryptocurrency is not a personal use asset.
Cryptocurrency is not a personal use asset if it is acquired, kept or used:
as an investment
in a profit-making scheme, or
in the course of carrying on a business.
If you have to exchange a cryptocurrency you own to Australian dollars (or to a different cryptocurrency) to purchase or acquire items, then this strongly indicates the cryptocurrency you own wasn’t acquired for personal use or enjoyment. It’s also worth keeping in mind that the longer you hold your cryptocurrency, the less likely it is that it will be a personal use asset.
If capital gains tax does apply, it isn’t treated as a separate tax - you'll report any capital gain in your tax return, where it'll be added to your assessable income and may increase the amount of tax you need to pay. Because tax isn't withheld from your salary and wages to cover capital gains, you may want to work out how much tax you'll owe and set aside sufficient funds to cover the amount.
Special rules apply in calculating capital gains, and you'll need to ensure you keep accurate records to help you complete your tax return. Any capital losses you make on personal use assets are disregarded.