If you have assets classified as CGT assets, you might be eligible for a personal use asset claim. If you go your personal use asset for less than $10,000, then the Capital Gains on its disposal might be exempt.
What the Australian Crypto Tax Rules State
According to the ATO rules, personal use assets are CGT assets, apart from collectibles, that are used or kept for personal enjoyment or use for yourself or your associates. If your assets fit in this description, then you can claim an exemption. The main issue is that you must prove the asset was bought for personal use.
Examples Provided by the ATO
The ATO provides examples of when the personal use classification may apply:
The first example is about Michael, who wants to attend a concert. At the concert, the organizer offers attendees a discount if they pay in crypto. Michael purchases crypto worth $270 and used the crypto to pay for a concert ticket on the same day. In such a case, the crypto is a personal use asset due to the circumstance under which it was bought and disposed of.
In another example, the ATO provides a situation where a crypto personal use tax claim may not apply. In this example, Peter has been holding onto his crypto for over six months. His goal has always been to wait for the price to appreciate and sell the crypto. However, before the six months elapses, Peter takes some of his crypto coins and buys goods and services directly. In such a case, the crypto will not be considered a personal use asset since Peter had been holding onto it as an investment.
In the third example, the ATO gives the example of Josh who acquires crypto worth $50 each fortnight. At the end of every fortnight, Josh used the crypto to engage in transactions to buy computer games. Josh is not holding onto the crypto as an investment.
In one fortnight, Josh finds a computer game where the vendor does not accept crypto payments. As a result, Josh turns to an online payment gateway to get the game. Under the conditions Josh bought and used his crypto, with the amount used via the online payment gateway considered, Josh qualifies for a personal use asset claim. Consequently, he will not pay the crypto tax.
In general, crypto-assets can be classified under the personal use exemption if:
- There was no reasonable expectation or intent of capital gains during the transaction
- The duration between when the purchase was made and when the crypto was disposed of was short and it was too short to be for investment purposes
- The crypto was disposed of in a barter-style transaction where you receive a service or good
Your crypto assets will be disqualified from personal asset exemption if they were acquired, kept, or used:
- For purposes of investment
- As part of a profit-making scheme
- In the course of carrying out ordinary business transactions
In general, the longer you hold onto a crypto asset, the less likely it is that the ATO will exempt taxes on crypto as a currency when you use it for a transaction. You should note that for personal use assets, the capital gains have a limit of up to $10,000. However, all capital losses on personal-use assets no matter how big or small are disregarded.
When deciding whether your assets fall under personal use assets, they may not fall neatly into any of the scenarios or guidelines above. As a result, determining the Crypto Taxes you owe can be quite complex. In such a case, the only sure answer would be the one provided by the ATO.
Whether you use a tax expert or decide to do everything on your own, the most important factor to remember is that you have to keep accurate records. To achieve this, acquire a crypto tax calculator, which can automate the whole process and gather data from different transactions online without any complications. It is especially so if you often use crypto for minor transactions, which can be difficult to keep up with given the fluctuating nature of crypto prices.