Private ruling: Taxation of cryptocurrency
Date of advice: 11 December 2018
Published: April 2019
Ruling period: Year ending 30 June 2018 | Year ending 30 June 2017 | Year ending 30 June 2016
Date scheme commenced: 1 July 2015

Ruling: Q1: Are the proceeds received from the sale of bitcoin assessable as ordinary income? | A1: No | Q2: Have you disposed of a CGT asset? | A2: Yes | Q3: Have you derived ordinary income or statutory income at the time of a chain split, also known as a “hard fork” of cryptocurrency? | A3: No, | Q4: Can you choose either the ‘parcel selection’ if particular parcels can be identified or the ‘first in first out’ approach in calculating CGT cost base of cryptocurrency disposed? | A4: Yes

Relevant facts and circumstances: You are an Australian resident for tax purposes. You do not hold any Cryptocurrency for personal or business use. You have an Australian s account. You have an account on an overseas exchange. You also hold cryptocurrencies in a 'wallet'. You have invested an amount into acquiring a cryptocurrency. You have disposed of some of that cryptocurrency in exchange for various other Cryptocurrencies. You received an additionally amount of Cryptocurrency Z as a result of a Hard Fork. You have disposed of various amounts of Cryptocurrency X that has resulted in gains. Your investment strategy and your intention from acquiring Cryptocurrencies were to buy and hold for long term growth.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 6-5 | Income Tax Assessment Act 1997 section 6-10 | Income Tax Assessment Act 1997 section 10-5 | Income Tax Assessment Act 1997 section 15-15 | Income Tax Assessment Act 1997 section 102-5 | Income Tax Assessment Act 1997 section 104-10 | Income Tax Assessment Act 1997 section 108-5 | Income Tax Assessment Act 1997 section 110-5 | Income Tax Assessment Act 1997 section 116-20

Reasons for decision: Detailed Reasoning - Question 1: The commissioner has analysed the scheme and agrees that the cryptocurrencies have been acquired and held for the purpose of investment, and are therefore subject to the CGT provisions. | Detailed Reasoning - Question 2: The commissioner has analysed the scheme and concluded that you have disposed of CGT assets. | Detailed Reasoning - Question 3: You held cryptocurrency as an investment, and received a new cryptocurrency as a result of a chain split; you did not derive ordinary income or make a capital gain at that time as a result of receiving the new cryptocurrency. As you held the new cryptocurrency as an investment, you will make a capital gain when you dispose of it. For the purposes of working out your capital gain, the cost base of a new cryptocurrency received as a result of a chain split is zero. If you held the new cryptocurrency as an investment for 12 months or more, you are entitled to the CGT discount and is based on the date of acquisition or the date the chain split occurred, whichever comes first. | Detailed Reasoning - Question 4: The Commissioner accepts the 'first-in first-out' approach as a reasonable basis of identification. For CGT purposes, the Commissioner will also accept the taxpayer's selection of the identity of assets disposed of if in fact they can be identified.