Crypto as a personal use asset & the tax you can expect

As the popularity of cryptocurrencies continues to grow, so does the complexity of understanding their tax implications. One common question we get is whether a crypto asset can qualify as a personal use asset and what that means for your tax obligations. Here at Ascent Accountants, we aim to provide you with clear and concise guidance to help you navigate this often-confusing area.

 

What is a personal use asset?

A personal use asset is something you keep or use primarily for personal purposes, such as buying items for personal use or consumption. In the context of cryptocurrency, this can include using crypto to purchase goods or services directly. However, whether a crypto asset qualifies as a personal use asset depends on how you use it and the circumstances of its acquisition and disposal.

 

Determining if your crypto is a personal use asset.

The key time for determining whether your crypto asset is a personal use asset is when you dispose of it. For example:


  • If you acquire crypto and use it shortly after to buy personal items, it’s more likely to be considered a personal use asset.
  • If you hold crypto for an extended period, with only a small portion used for personal purchases, it’s unlikely to qualify as a personal use asset.


Your original intention when acquiring the crypto may be relevant, but it’s not the deciding factor. Instead, your actual use of the asset will determine its classification. That’s why maintaining accurate records  of your crypto transactions and usage is essential.

 

When is a personal use crypto asset exempt from CGT?

If your crypto asset is classified as a personal use asset, certain tax exemptions may apply:


  • Capital Gains Tax (CGT) Exemption: A capital gain on the disposal of a personal use crypto asset is exempt from CGT if:
  • The crypto asset was acquired for less than $10,000.
  • Capital losses exclusion: Any capital losses made on personal use assets, including crypto, cannot be used to offset other capital gains or carried forward to future income years.


Example: Crypto asset for personal use.

Michael wants to buy concert tickets that are discounted for payments made in crypto. He spends $270 on crypto assets and uses them to purchase the tickets on the same day. Because the crypto was acquired and used in a short period for personal use, it qualifies as a personal use asset and is exempt from CGT.

 

When crypto is not a personal use asset.

In most cases, crypto assets are not personal use assets when they are:

  • Held as an investment: For example, holding crypto to sell at a favourable exchange rate.
  • Part of a profit-making scheme: Such as actively trading crypto for profit.
  • Used in a business: For example, accepting crypto payments for goods or services.
  • Used as top-ups. For example, topping up prepaid debit cards or gift cards, or if a payment gateway (e.g., PayPal) is used to facilitate purchases.


Example: Crypto held as an investment.

Emma regularly buys crypto intending to sell at a favourable rate. After some time, he decides to use a portion of his crypto to purchase goods. Since Emma’s primary purpose for holding the crypto was investment, it doesn’t qualify as a personal use asset.


Record-keeping is essential.

To ensure you meet your tax obligations, it’s important to keep detailed records of:

  1. Your intention when acquiring the crypto.
  2. How and when the crypto was used.
  3. The value of the crypto at the time of each transaction.

For more detailed guidance, check out this ATO resource on keeping crypto records.


Here’s how we can help.

At Ascent Accountants, we’re committed to helping you understand your tax obligations and make informed decisions about your crypto assets. If you’re unsure whether your crypto qualifies as a personal use asset or how tax rules apply to your situation, reach out to us for tailored advice.



By working with us, you can ensure your crypto compliance while maximising any potential tax benefits. 

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