Edited version of private advice

Authorisation Number: 1052116033924

Date of advice: 15 May 2023

Ruling

Subject: Cryptocurrency and temporary resident

Question

Is cryptocurrency held as an investment classified as taxable Australian property and is therefore any gain on its disposal taxable in Australia for a temporary resident?

Answer

No

Question 2

Do cryptocurrency rewards (staking, interest etc.) derived from overseas exchanges form part of a temporary residents assessable income?

Answer

No

Question 3

Does income derived from cryptocurrency day trading on overseas exchanges form part of a temporary residents assessable income?

Answer

No

Question 4

Does capital gains tax apply to a temporary resident for cryptocurrency purchased on an Australian exchange and sold on an overseas exchange?

Answer

No

This ruling applies for the following periods:

Year ended 30 June 20XX

Year ended 30 June 20XX

Year ending 30 June 20XX

The scheme commenced on:

1 July 20XX

Relevant facts and circumstances

You made cryptocurrency transactions through a mix of Australian and overseas exchanges to purchase, sell and trade cryptocurrency.

You were granted a temporary visa and your partner is not an Australian Citizen or a permanent resident as they also hold a temporary visa.

You purchased and sold cryptocurrency assets through Australian and overseas exchanges. You have also derived income through cryptocurrency rewards such as staking and interest as well as day trading with overseas exchanges. You have not derived income from cryptocurrency rewards or day trading through Australian exchanges.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 768-910

Income Tax Assessment Act 1997 section 768-915

Income Tax Assessment Act 1997 section 855-15

Reasons for decision

Question 1

Is cryptocurrency held for investment classified as taxable Australian property and is therefore any gain on its disposal taxable in Australia for a temporary resident?

Summary

The capital gain or loss you make from disposal of cryptocurrency held for investment is disregarded as you are a temporary resident.

Detailed reasoning

An individual is a temporary resident of Australia for taxation purposes if they hold a temporary visa granted under the Migration Act 1958, and they or their spouse are not an Australian resident within the meaning of the Social Security Act 1991.

Subdivision 768-R of the Income Tax Assessment Act 1997 (ITAA 1997) provides that foreign source income (apart from income derived from working overseas) and certain capital gains of a temporary resident are not taxable in Australia.

Section 768-915 of the ITAA 1997 allows a taxpayer to disregard capital gain or capital loss they make if they are a temporary resident when, or immediately before the CGT event happens, provided the capital gain or capital loss would have been disregarded under division 855 of the ITAA 1997 if the taxpayer were a foreign resident at that time.

Division 855 of the ITAA1997 allows foreign residents to disregard a capital gain or loss from a CGT event if the event happens to an asset that is not taxable Australian property.

Section 855-15 of the ITAA 1997 provides that taxable Australian property includes:

•         Australian real property, such as a house, apartment, commercial building or land

•         An indirect interest in Australian real property

•         A mining, quarrying or prospecting right in Australia

•         A capital gains transaction (CGT) asset that you have used to carry on a business through a permanent establishment in Australia

•         An option or right over one of the above - for e.g. a contract to purchase property off the plan

In your case, the cryptocurrency you hold does not meet the definition of taxable Australian property. As you disposed of cryptocurrency while you were a temporary resident, any capital gain or loss you made from the disposal would be disregarded under section 768-915 of the ITAA 1997.

Question 2

Do cryptocurrency rewards (staking, interest etc.) derived from overseas exchanges form part of a temporary residents assessable income?

Summary

Cryptocurrency rewards derived from an overseas exchange are considered non assessable non exempt income to a temporary resident.

Detailed reasoning

In staking rewards, you will usually receive a reward in the form of additional tokens from holding the original tokens. The money value of additional tokens is ordinary income at the time you receive the income. Generally, you need to declare the income in your tax return as other income.

However, foreign income that is earned by a temporary resident of Australia is not assessable in Australia, this includes staking rewards earned through an overseas exchange.

The following ordinary and statutory income derived by a temporary resident from a source other than an Australian source will be non-assessable non-exempt income under section 768-910 of the ITAA 1997:

•         Ordinary income derived directly or indirectly from a source other than an Australian source by a person who is a temporary resident when the income is derived, or

•         Statutory income, other than a net capital gain, derived from a source other than an Australian source by a person who is a temporary resident when the income is derived.

Temporary residents and foreign residents of Australia are generally taxed on their Australian-sourced income and there is no exemption.

Cryptocurrency rewards such as staking and interest derived from an overseas exchange are considered non assessable non exempt income to a temporary resident under section 768-910 of the ITAA 1997.

Question 3

Does income derived from cryptocurrency day trading on overseas exchanges form part of a temporary residents assessable income?

Summary

The income derived from cryptocurrency day trading on an overseas exchange is considered non assessable non exempt income to a temporary resident.

Detailed reasoning

Cryptocurrency day trading involves purchasing and selling cryptocurrency for short term gains. You derived income from cryptocurrency day trading with overseas exchanges. Foreign income that is earned by a temporary resident of Australia is not assessable in Australia, this includes income from cryptocurrency day trading with an overseas exchange.

The income received from cryptocurrency day trading with an overseas exchange while you are a temporary resident is considered non assessable non exempt income under section 768-910 of the ITAA 1997.

Question 4

Does capital gains tax apply to a temporary resident for cryptocurrency purchased on an Australian exchange and sold on an overseas exchange?

Summary

The capital gain or loss you make from disposal of cryptocurrency is disregarded as you are a temporary resident.

Detailed reasoning

Disposing of cryptocurrency assets triggers a CGT event.

However, as discussed in Question 1, if you are a temporary resident, you can disregard (and therefore exclude from your assessable income in Australia) any gain or loss made from a CGT event if the event happens to an asset that is not taxable Australian property. Cryptocurrency does not meet the definition of taxable Australian property under section 855-15 of the ITAA 1997.

In your case, if you dispose of cryptocurrency while you are a temporary resident, any capital gain or capital loss you make from the disposal will be disregarded.