Crypto Personal Use Asset

If you purchased cryptocurrency for personal use, and you fit the exemption requirements, then you are able to ignore any CGT gain or loss on disposal. Identifying what assets are for personal use is tricky in many cases and may require a private ruling from the ATO.


  • Category

    Personal Use Asset
  • Activities

    Personal Use, Personal Enjoyment Short hold duration No intent to make a profit Less then $10,000 acquisition price
  • Implications

    May be eligible for CGT exemption No tax on CGT gain Cannot claim CGT loss

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Description

If your assets are classified as CGT assets then you may be eligible to claim the personal use asset exemption. If your acquired your personal use asset for less than $10,000 then the Capital Gains on the disposal are exempt.

In the words of the ATO: Personal use assets are CGT assets, other than collectables, used or kept mainly for the personal use or enjoyment of you or your associates. If you fit this description then you will be eligible to claim the exemption. The main difficulty is in proving you purchased your asset for personal use. The ATO has given an example scenario which fits the personal use exemption:

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.

In what is another typically met scenario, the ATO has described a situation which would not be categorised as a personal use asset:

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.

Your asset may fall under the personal use exemption if:

  • there was no intent or reasonable expectation of a capital gain in the transaction.
  • the time duration between purchase and disposal is of a short time duration, significantly less than expected for investment purposes.
  • you disposed the asset directly in a barter-style transaction for a good or service.

Your assets are not a personal 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 a scenario that does not fall neatly into the examples provided then you might consider getting a private ruling issued from the ATO. This is a cost-effective way to get a definitive result from the ATO on your particular case. Kova Tax are specialists in the cryptocurrency taxation and accounting space and regularly work with the ATO on similar matters. We are well positioned to get you a favourable outcome on a private ruling and can handle the process on your behalf. You can organise a free initial consultation with us today with no ongoing obligation, our goal is always to get you the best tax outcome.

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