Edited version of private advice

Authorisation Number: 1052356167463

Date of advice: 11 February 2025

Ruling

Subject: Cryptocurrency

Question 1

Were the Bitcoin that you disposed of, 'personal use assets'?

Answer 1

No.

This ruling applies for the following periods:

Year ended 30 June 20XX

Year ended 30 June 20XX

Year ended 30 June 20XX

Year ended 30 June 20XX

Year ended 30 June 20XX

The scheme commenced on:

1 July 20XX

Relevant facts and circumstances

Your background

You consider yourself a hobbyist and dabbler in Bitcoin, blockchain and cryptocurrency.

From the time you got involved with Bitcoin, you have been an active participant in the Bitcoin community including: contributing to discussions both in online forums and in person; attending a crypto conference and completing a crypto course.

You are not a tax professional.

You run, a micro-business in partnership with your spouse. This business undertakes no Bitcoin-related activities.

You have never mined Bitcoin.

You do not carry and have never carried on a Bitcoin business.

You have never held shares or any other financial interests in a Bitcoin or other cryptocurrency ETF or company (such as a miner or exchange).

Cryptocurrency history

On DD MM 20XX, you purchased X Bitcoin at $XX AUD per Bitcoin plus commission for a total of $XX.

In MM 20XX, you purchased X Litecoin.

On DD MM 20XX you bought a small amount of additional Bitcoin.

In the 20XX-XX income year, you converted X at $X AUD per Bitcoin to $X AUD.

In the 20XX-XX income year, you converted X at $X AUD per Bitcoin to $X AUD.

In the 20XX-XX income year, you converted X at $X AUD per Bitcoin to $X AUD.

In the 20XX-XX income year, you converted X at $X AUD per Bitcoin to $X AUD.

In the 20XX-XX income year, you converted X at $X AUD per Bitcoin to $X AUD.

In the 20XX-XX income year, you converted X at $X AUD per Bitcoin to $X AUD.

You have converted no other Bitcoin or Litecoin outside of these instances.

Bitcoin expenses

In the 20XX-XX income year, the converted Bitcoin was used to pay a small personal expense.

In the 20XX-XX income year, you drew heavily on your savings and borrowings which was a factor in the Bitcoin conversions listed.

In the 20XX-XX income year, the converted Bitcoin was used to cover everyday living expenses that filled a gap in your business cash flow.

The remaining conversions of Bitcoin were for personal use and predominantly related to the renovation and extension you undertook from late-20XX to mid-20XX of your current home.

You continue to hold the vast majority of your Bitcoin and Litecoin you acquired in 20XX, 20XX and 20XX.

To date, you hold approximately X Bitcoin of your original X Bitcoin acquisition.

You have not disposed of any of your Litecoin.

You intend to retain and not dispose of your Bitcoin and Litecoin holding for the foreseeable future.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 108-20

Income Tax Assessment Act 1997 subsection 108-20(2)

Income Tax Assessment Act 1997 subsection 118-10(3)

Reasons for decision

Section 108-20 of the Income Tax Assessment Act 1997 (ITAA 1997) states that personal use assets are Capital Gains Tax (CGT) assets, other than collectables, that are used or kept mainly for the personal use or enjoyment of you or your associates.

The Commissioner's view of when a crypto asset may be considered a personal use asset is contained on our webpage 'Crypto asset as a personal use asset' which can be found by searching for 'QC 69954' on ato.gov.au. It states:

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.

It also states:

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

Taxation DeterminationTD 2014/26 Income tax: is bitcoin a 'CGT asset' for the purposes of subsection 108-5(1) of the Income Tax Assessment Act 1997? states:

The inherent nature of bitcoin means that it is generally either used as a means of exchanging it for something of value, or it is kept as a speculative investment.

Your circumstances

You stated that you acquired Bitcoin because you were curious in the technology, and to be part of and support the cryptocurrency community. However, as stated above, your original intention is not determinative. Rather it is the main use established at the time of disposal that dictates whether it is a personal use asset.

In your case, you did not use your Bitcoin as a means of exchange to directly pay for personal expenditure. Rather you converted your Bitcoin to Australian dollars before then using the Australian currency to pay for personal expenditure. Also, you have held your Bitcoin for several years during which it has increased substantially in value and only used a small proportion of it. Objectively, it is considered that the main use of your Bitcoin has been as a speculative investment. Therefore, the Bitcoin you have disposed of were not personal use assets.

We note that you also stated that you do not consider the Bitcoin to be an investment and have not acted as an investor or trader. However, it is common that a speculative investment is held for long periods rather than being dealt with or traded on a short term basis. As stated previously, based on the objective facts, and given the inherent nature of Bitcoin, it is considered that the main use of the Bitcoin you have disposed of, was as a speculative investment.

As the relevant time for determining if a crypto asset is a personal use asset is when you dispose of it, we cannot make a definitive decision regarding the crypto you still hold. However, taking into account the facts that have already occurred and based on the Commissioner's view as expressed in QC 66954, it is considered unlikely that the crypto would be determined to be personal use assets when you dispose of it.

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