Private ruling: Crypto currency and share investments
Date of advice: 27 November 2018
Published: March 2019
Ruling period: Year ended 30 June 20XX | Year ended 30 June 20XX | Year ended 30 June 20XX | Year ended 30 June 20XX
Date scheme commenced: 1 July 20XX

Ruling: Q1: Were the shares owned by you when you became an Australian resident held on capital account? | A1: Yes | Q2: Were the cryptocurrencies owned by you when you became an Australian resident held on the capital account? | A2: Yes | Q3: Where the shares and cryptocurrencies were held on the capital account when you became an Australian resident, is the first element of the cost base and reduced cost base of each of the shares and cryptocurrencies in your hands their market value on date of you becoming an Australian resident? | A3: Yes | Q4: Has each disposal of cryptocurrencies since you became an Australian resident resulted in a net capital gain and not ordinary income under section 6-5 of the Income Tax Assessment Act 1997 or statutory income other than a net capital gain? | A4: Yes

Relevant facts and circumstances: Y ou were born in Country X. When you were under 18 you moved to Country Y. Later you moved to Country Z. You formed a team and played a game professionally in person and online. While in Country Z, you acquired a number of financial investments with earnings from your game. These included shares, crypto currencies and other assets. You did not trade in these investments or use these for income producing purposes. Later, while in Australia to compete at a tournament, you met a person from Australia. You and this person began a relationship. In early 20XX the team, still in Country Z, disbanded. You decided to move permanently to Australia. You entered Australia on a temporary Visa. You continued to play the game professionally. In Autumn 20XX you applied to the Registry of Births, Deaths and Marriages Victoria to register your domestic relationship with your partner. This relationship was registered later that year. You made an application for an Australian partner Visa (subclass 820) as a de facto partner. In Winter 20XX, you received a bridging visa to stay in Australia. Since you arrived in Australia, you have sold some of the various investments you owned and acquired other investments. You have continued not to trade in the investments or use them for income producing purposes.

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 15-15 | Income Tax Assessment Act 1997 Part 3-1 | Income Tax Assessment Act 1997 Subdivision 855-B | Income Tax Assessment Act 1997 section 768-950

Reasons for decision: Detailed Reasoning - Capital vs Revenue: Shares and cryptocurrencies are generally considered Capital Gains Tax (CGT) assets. This is unless they are sold as part of a business operation or an isolated commercial transaction. We are satisfied on the facts that there are no indications that the shares or cryptocurrencies are being sold as part of a commercial transaction or as part of a business. This includes the shares and cryptocurrencies that were held before your arrival in Australia and also for any held after your arrival in Australia. Therefore they all will be held on the capital account and when they are sold it could result in a capital gain (or loss). | Detailed Reasoning - Cost base on becoming an Australian resident: Section 855-45(2) of the Income Tax Assessment Act 1997 (ITAA 1997) provides that for each CGT asset you own when you become an Australian resident, the first element of the cost base and reduced cost base of the asset is the market value of the asset at the time you become an Australian resident. You became an Australian resident on XX/mth/ 20XX based on the given fact that your application to register their relationship was submitted. However whether a spousal relationship exists is not determinant on formal registration of the relationship. Based on the given fact regarding residency, the first element of the cost base and reduced cost base of the shares and cryptocurrencies you held will be the market value on the date you became an Australian resident. | Detailed Reasoning - Capital gain (or loss): When the cryptocurrencies are disposed of, CGT event A1 will occur. This will generally result in a capital gain or loss occurring. Under section 102-5 of the ITAA 1997, capital gains are included in your assessable income. Australia would have a taxing right to this income. However if the cryptocurrencies had been bought on overseas exchanges then other countries could have taxing rights to the gains. Any Double Taxation Agreements that existed between Australia and these countries would need to be analysed to determine the taxing consequences.