A crypto asset (such as Bitcoin, a cryptocurrency) is a personal use asset if you keep or use it mainly for personal use, for example, to buy items for personal use or consumption.
See Non-fungible tokens for information on their use as personal use assets.
The relevant time for determining if a crypto asset is a personal use asset is when you dispose of it:
- A crypto asset you acquire and use in a short period of time to buy items for personal use or consumption is more likely to be a personal use asset.
- A crypto asset you acquire and hold for some time before you use it, or only use a small proportion of it, to buy items for personal use or consumption is less likely to be a personal use asset.
During a period of ownership, the way you keep or use a crypto asset may change. For example, you may originally acquire a crypto asset to buy items for personal use and enjoyment, but ultimately keep it as an investment or use it in carrying on a business. It is the main use, determined at the time when you dispose of a crypto asset, that dictates whether it is a personal use asset.
For record keeping purposes, evidence of your original intention at the time you acquired the crypto asset may be relevant but is not determinative of whether your crypto asset is a personal use asset. Instead, you will need to demonstrate how you actually kept or used the crypto asset from the time of acquisition up until the time you disposed of it. See Keeping crypto records for information on how to keep records of crypto assets and transactions.
Most people hold crypto assets as an investment, with an expectation that the price of the crypto assets increase over time to give them a return as:
- ordinary income
- a capital gain.
If you use the return from your crypto asset investments to acquire items of personal use or consumption, this will not change the crypto asset from being an investment.
A capital gain on the disposal of a crypto asset is exempt from CGT if:
- it is a personal use asset
- you acquire it for less than $10,000.
You disregard all capital losses you make on personal use assets, including crypto assets, for CGT purposes. That is, you don't take that loss into account when calculating a net capital gain for the income year and can't carry it forward as a capital loss to use in future income years.
Example: crypto asset for personal use held for short period
Michael wants to attend a concert. The concert provider offers tickets with a discount on the price for payments made in crypto.
Michael pays $270 to buy crypto assets, which he then uses to pay for the tickets on the same day.
Under these circumstances, Michael acquires and uses the crypto assets in a short period of time to buy personal items. As such, the crypto assets are personal use assets.End of example
Crypto assets are not personal use assets when you keep or use them:
- as an investment
- in a profit-making scheme
- in carrying on a business.
Example: crypto assets held as investment to make profit
Peter has been regularly keeping crypto assets with the intention of selling at a favourable exchange rate.
After some time, he decides to buy some goods and services directly with some of his crypto assets.
Because Peter held the crypto assets primarily as an investment, they are not personal use assets.End of example
Except in rare situations, a crypto asset is not a personal use asset if you:
- exchange your crypto asset for Australian dollars (or for a different crypto asset) to buy items for personal use or consumption
- use your crypto asset to acquire and use a gift card or similar product that you then use to acquire items for personal use or consumption
- top up a prepaid debit card with crypto assets, which is converted into Australian dollars and you later use it to acquire items for personal use or consumption
- use a payment gateway or other bill payment intermediary to acquire the items on your behalf (rather than acquiring them directly with your crypto assets). Examples include Bitpay, Coinbase, Secure Pay, PayPal, Apple Pay and Square.