Can Crypto Be a Personal Use Asset?

In most instances, spending crypto is taxed in Australia - so you'll pay Capital Gains Tax on any profit you've made from your crypto rising in price. However, there is one exception to this - the personal use asset rule. Find out about how the personal use asset rule works with crypto.

What is a personal use asset in Australia?

Personal use assets are capital assets that you keep for personal use or enjoyment. This could be crypto, furniture, household items, and more. The ATO has a full list of personal use assets in its guidance.

Capital gains and losses on personal use assets are exempt.

When it comes to crypto, your crypto may be viewed as a personal use asset if it is kept or used predominantly to purchase items for personal use or consumption.

Can crypto be a personal use asset?

Yes. Crypto may be considered a personal use asset, but there are very particular conditions for this. For example, cryptocurrency may be viewed as a personal use asset in the following situations: 

• Example: You want to buy an NFT ticket to attend a concert so you spend Australian dollars to buy Ethereum - which you immediately use to buy the NFT ticket. The Ethereum would be considered a personal use asset because you’ve held it for a short time and used it to purchase a concert ticket for your own personal use.
• Example: You regularly purchase $20 worth of Bitcoin monthly to pay for an online newsletter subscription service. During each of the same months, you use that Bitcoin to pay for your subscription. Your Bitcoin is always being held for a short period, with the sole purpose of paying for a service for your own consumption, therefore the disposed Bitcoin would be considered to be a personal use asset. 

When won't crypto be viewed as a personal use asset?

When the crypto is acquired and held for some time before any such transactions are made, or if only a small portion of the crypto is used to make some transactions, it's unlikely that the crypto is a personal use asset (instead it may be viewed as an investment). A cryptocurrency is unlikely to be a personal use asset in the following situations:

• When you have to exchange crypto for Australian dollars or some other cryptocurrency to purchase the items for personal consumption.
• If you have to use a payment gateway or other payment intermediary to acquire the items on your behalf (as opposed to using crypto directly).

The time of disposal of the crypto is the key to working out if it's a personal use asset. The longer the crypto is held, the more unlikely it is to be considered a personal use asset — even if you ultimately use it to purchase items for personal consumption. This is because you have likely used crypto as an investment.

So use this provision with care. If you end up getting investigated by the ATO, the burden of proof is on you to show that the crypto was, in fact, a personal use asset. Also, all capital losses you make on personal use assets cannot be written off against capital gains at any point.

The information on this website is for general information only. It should not be taken as constituting professional advice from Koinly. Koinly is not a financial adviser. You should consider seeking independent legal, financial, taxation or other advice to check how the website information relates to your unique circumstances. Koinly is not liable for any loss caused, whether due to negligence or otherwise arising from the use of, or reliance on, the information provided directly or indirectly, by use of this website.