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Morty

XRP a "personal use" item. (for tax reasons)

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So I just learned that "personal use" items under $10,000 are exempt from the aussie capital gains tax. 

https://www.ato.gov.au/general/capital-gains-tax/cgt-assets-and-exemptions/#Personal_use_assets

I paid less than $10K for my zerp (3 years ago) and I totally needed them for personal use. You know for buying stuff on the interwebs. 

Looks like a nice little loophole for Aussies. 

 

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24 minutes ago, Morty said:

So I just learned that "personal use" items under $10,000 are exempt from the aussie capital gains tax. 

https://www.ato.gov.au/general/capital-gains-tax/cgt-assets-and-exemptions/#Personal_use_assets

I paid less than $10K for my zerp (3 years ago) and I totally needed them for personal use. You know for buying stuff on the interwebs. 

Looks like a nice little loophole for Aussies. 

 

I believe you are looking at it the wrong way, by personal use under 10k it means that you can spend under 10k in a financial year and it will be tax free, not that your if your initial investment was under 10k so your outcome wouldn't be affected (unless if that's under 10k)

If you invested $100 and now it was $9,999 then you don't need to pay CGT if you use it to spend on personal use.

So by that rule one can use $10k every financial year to spend on interwebs and not pay CGT but if you cash out or spend more than 10k you are liable to pay taxes.

 

Added

If your position right now is in say millions then you have to pay taxes if you spend over 10k each financial year or cash out any amount regardless of your initial investment being under 10k

Edited by Guest
Added

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What happens if you don't exchange cryptocurrencies back to Fiat but instead use them to pay for goods and services?

Aswell as my XRP holdings I've exchanged Fiat for several cryptos in the hope that 10-15 years from now their value will be greatly inflated and be widely accepted around the world for goods, I shouldn't have to pay taxes on these should I?

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30 minutes ago, Invincible said:

I believe you are looking at it the wrong way, by personal use under 10k it means that you can spend under 10k in a financial year and it will be tax free, not that your if your initial investment was under 10k so your outcome wouldn't be affected (unless if that's under 10k)

If you invested $100 and now it was $9,999 then you don't need to pay CGT if you use it to spend on personal use.

So by that rule one can use $10k every financial year to spend on interwebs and not pay CGT but if you cash out or spend more than 10k you are liable to pay taxes.

 

Added

If your position right now is in say millions then you have to pay taxes if you spend over 10k each financial year or cash out any amount regardless of your initial investment being under 10k

That’s exactly right Mr.Invincible.  Nice summary

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26 minutes ago, kev4022 said:

What happens if you don't exchange cryptocurrencies back to Fiat but instead use them to pay for goods and services?

Aswell as my XRP holdings I've exchanged Fiat for several cryptos in the hope that 10-15 years from now their value will be greatly inflated and be widely accepted around the world for goods, I shouldn't have to pay taxes on these should I?

It doesn't matter, you would only be able to spend/use max 10k(tax free) and will have to pay tax on the amount going over 10k threshold. 

I don't think a multi millionaire would care about saving $2300(supposedly you held over a year) CGT every year but for the people with small holding it can benefit a bit.

 

Edit: Also this 10k only applies for personal use on items purchased by crypto and not crypto to fiat for 10k

Edited by Guest

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If you have a decent stack, make sure to hold at least 12 months.  You will get a 50% discount on the CGT (if you sell under 12 months 100% of the gain is taxed at your nominal tax rate, after 12 months only 50% of the gain at your nominal tax rate).  I gave this example for Aussie tax implications only.

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2 hours ago, Morty said:

So I just learned that "personal use" items under $10,000 are exempt from the aussie capital gains tax. 

https://www.ato.gov.au/general/capital-gains-tax/cgt-assets-and-exemptions/#Personal_use_assets

I paid less than $10K for my zerp (3 years ago) and I totally needed them for personal use. You know for buying stuff on the interwebs. 

Looks like a nice little loophole for Aussies. 

 

Do that and you can explain all of that to your prison mate

 

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Cryptocurrency as an investment

If you acquire cryptocurrency as an investment, you may have to pay tax on any capital gain you make on disposal of the cryptocurrency.

You will make a capital gain if the capital proceeds from the disposal of the cryptocurrency are more than its cost base. Even if the market value of your cryptocurrency changes, you do not make a capital gain or loss until you dispose of it.

If you hold the cryptocurrency as an investment, you will not be entitled to the personal use asset exemption. However, if you hold your cryptocurrency as an investment for 12 months or more, you may be entitled to the CGT discount to reduce a capital gain you make when you dispose of it.

If you have a net capital loss you can use it to reduce a capital gain you make in a later year. You cannot deduct a net capital loss from your other income.

You are required to keep records of each cryptocurrency transaction in order to work out whether you have a made a capital gain or loss from each CGT event.

Quote

Personal use asset

Cryptocurrency is only capable of being acquired, held and transacted with. Both the period of holding and the nature of the subsequent transaction will be relevant to whether your cryptocurrency is a personal use asset.

The relevant time for determining whether or not an asset is a personal use asset is at the time of its disposal.

During a period of ownership, the way that cryptocurrency is kept or used may change (for example, cryptocurrency may originally be acquired for personal use and enjoyment, but ultimately be kept or used as an investment, to make a profit on ultimate disposal or as part of carrying on a business). The longer the period of time that a cryptocurrency is held, the less likely it is that it will be a personal use asset.

Cryptocurrency is not a personal use 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.

I did not claim any CGT events for cryptos this year as they have still not finalised and can always play catchups.

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7 hours ago, kev4022 said:

What happens if you don't exchange cryptocurrencies back to Fiat but instead use them to pay for goods and services?

Aswell as my XRP holdings I've exchanged Fiat for several cryptos in the hope that 10-15 years from now their value will be greatly inflated and be widely accepted around the world for goods, I shouldn't have to pay taxes on these should I?

in the US, any crypto transaction has to be recorded and taxed 

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8 hours ago, Invincible said:

I believe you are looking at it the wrong way, by personal use under 10k it means that you can spend under 10k in a financial year and it will be tax free, not that your if your initial investment was under 10k so your outcome wouldn't be affected (unless if that's under 10k)

If you invested $100 and now it was $9,999 then you don't need to pay CGT if you use it to spend on personal use.

So by that rule one can use $10k every financial year to spend on interwebs and not pay CGT but if you cash out or spend more than 10k you are liable to pay taxes.

 

Added

If your position right now is in say millions then you have to pay taxes if you spend over 10k each financial year or cash out any amount regardless of your initial investment being under 10k

 

No, I think I'm reading it the right way. Here's a quote from the ATO I found on a forum. Source linked below. 

 

"Let’s start with the principle that Bit-coin is considered to be a CGT asset; any gain from disposal of bitcoin will be subject to capital gains legislation.

However, gains from disposal of personal use assets are disregarded. Personal use assets are CGT assets, other than collectables, used or kept mainly for the personal use or enjoyment of you or your associates. Any personal use asset you acquired for less than $10,000  is disregarded for CGT purposes."

 

https://community.ato.gov.au/t5/General-tax-questions/How-to-declare-Bitcoin/td-p/980

 

 

acquired for less than $10,000  not disposed of for less than $10k.

 

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2 hours ago, MegaNerd said:

in the US, any crypto transaction has to be recorded and taxed 

In this example I'd exchange 7.5k for 1 BTC then hold it for 10 years with a view to using it to buy stuff with, so would I be taxed on 1 BTC or the dollar equivalent of 1 BTC 10 years later?

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4 minutes ago, kev4022 said:

In this example I'd exchange 7.5k for 1 BTC then hold it for 10 years with a view to using it to buy stuff with, so would I be taxed on 1 BTC or the dollar equivalent of 1 BTC 10 years later?

you would use https://bitcoin.tax

input the date, the amount bought and sold for

it will calculate everything. 

are you in the USA?

you buy BTC originally. no tax.

you sold it for XRP.. taxed

hold for 10 years... taxed when you sell  in 10 years.

every transaction is taxed.

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4 hours ago, Morty said:

 

No, I think I'm reading it the right way. Here's a quote from the ATO I found on a forum. Source linked below. 

 

But you are not reading it the right way, in that example it used bitcoin mining as a form of hobby, that means the proceeds from the hobby were not motivated by profit and thus the gains are for personal use. You bought XRP for the specific intention of gaining profit from your purchase at a later time. You are an investor and it will be counted as a capital gain. You will not be able to prove to the ATO that your intention for buying XRP was for personal use.

A personal use case would be "Company Z wants to sell you a good or service and they require payment in XRP. You buy XRP and give it to that company that day as payment for the goods offered." As you only held it for one day and your intention was to immediately use it to purchase something, it has no CGT requirements as you did not hold it for investment purposes.

Another example would be "In 2009 you started mining Bitcoin for fun because you were interested in helping crunch the numbers, after three weeks you stopped mining and held 10 Bitcoin, you sold these Bitcoin in 2017 for $20,000 each." Because your intention originally was to help a community project and at that time Bitcoin held no real value, you can argue that it was simply a by-product of your hobby and thus a personal use asset.

The ATO will regard the circumstances in which you acquired and used the cryptocurrency, to determin if the cryptocurrency is a personal use asset. XRP will never be seen as a personal use asset because you engaged in speculative trading to acquire the asset.

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35 minutes ago, Tribble said:

But you are not reading it the right way, in that example it used bitcoin mining as a form of hobby, that means the proceeds from the hobby were not motivated by profit and thus the gains are for personal use. You bought XRP for the specific intention of gaining profit from your purchase at a later time. You are an investor and it will be counted as a capital gain. You will not be able to prove to the ATO that your intention for buying XRP was for personal use. 

A personal use case would be "Company Z wants to sell you a good or service and they require payment in XRP. You buy XRP and give it to that company that day as payment for the goods offered." As you only held it for one day and your intention was to immediately use it to purchase something, it has no CGT requirements as you did not hold it for investment purposes.

Another example would be "In 2009 you started mining Bitcoin for fun because you were interested in helping crunch the numbers, after three weeks you stopped mining and held 10 Bitcoin, you sold these Bitcoin in 2017 for $20,000 each." Because your intention originally was to help a community project and at that time Bitcoin held no real value, you can argue that it was simply a by-product of your hobby and thus a personal use asset.

The ATO will regard the circumstances in which you acquired and used the cryptocurrency, to determin if the cryptocurrency is a personal use asset. XRP will never be seen as a personal use asset because you engaged in speculative trading to acquire the asset.

Tip: Dont play games with the ATO.

History has shown they will not go after big companies and their various tactics for extracting money from the country without tax,

But they will hunt down small time individuals, even for a $100 miscalculation.

And the pentalty for getting it wrong, very heavily outweighs any benefit you gain from avoiding tax ( tax * 2 + interest -- basically setup to ensure you end up owing more than your profit )

 

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