Australian tax authorities have recently updated their guidance on cryptocurrency transactions involving gift and debit cards. The new rules clarify how capital gains tax (CGT) applies to various crypto-related transactions.
CGT Events for Gift Cards
Using crypto to acquire a gift card triggers a CGT event. Regardless of whether the gift card is denominated in Australian Dollars (AUD) or cryptocurrency, the capital proceeds equal the market value of the card at the time of acquisition. For instance, if someone buys a gift card worth $100 using cryptocurrency initially valued at $50, they incur a capital gain of $50.
Card Top-Ups with Cryptocurrency
Loading or topping up a gift or debit card with cryptocurrency also constitutes a CGT event. Here, the capital proceeds equal the amount by which the card’s available balance is increased. For example, if a person adds $2,000 to their debit card by transferring cryptocurrency, the capital proceeds are $2,000.
Value Changes and Tax Implications
When using gift or debit cards denominated in cryptocurrency, changes in the asset’s value affect the tax outcome. For instance, if a gift card valued at 500 XRP was purchased when XRP was worth $1 each and used to buy an item costing 400 XRP, the value of XRP might have changed. If XRP drops to $0.95, the user incurs a capital loss of $20.
The inclusion of cryptocurrencies as examples in the Australian Tax Office's guidelines underscores the relevance of these rules for widely used cryptocurrencies.
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