More than one in four cryptocurrency investors plan to purchase crypto-centric gifts for Christmas this year, but tax experts are warning shoppers to do their research first.
The survey of 2,000 Australians who had engaged with cryptocurrency in the past year found that of those planning to buy crypto gifts, 42 per cent were considering coin vouchers, 30 per cent were looking at non-fungible tokens (NFTs), while others were eyeing off crypto books or cryptocurrency-themed socks or hoodies.
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Additionally, more than half were considering buying actual coins.
The majority of those planning to buy crypto-gifts were younger than 44.
“Australians are clearly very keen to adopt cryptocurrencies and integrate their use into day-to-day spending,” Crypto.com general manager for Asia-Pacific Karl Mohan said.
Meanwhile, 8 per cent of those surveyed by Crypto.com planned to use crypto to purchase gifts.
However, H&R Block director of tax communications Mark Chapman urged crypto-investors to take care when gifting Bitcoin, Ethereum, Dogecoin or other cryptocurrencies.
“Gifting cryptocurrency carries capital gains tax (CGT) risks. When you gift the crypto, you are deemed to have disposed of it for CGT purposes,” Chapman said.
“Because you’ve gifted it, you could be subject to the ‘non-arm’s length’ rules, which substitute the actual amount you were given in exchange for the crypto [nothing because it was a gift] with the market value of the crypto at the time you disposed of it.”
Under this rule, investors would pay CGT on the market value, less the actual cost of acquiring it.
“If there has been a spike in value between the date you acquired it and the date you gifted it, you could be up for quite the CGT shock,” Chapman said.
Additionally, if the cryptocurrency was gifted within a year of acquiring it, taxpayers wouldn't be eligible for the 50 per cent CGT discount.
“So, if you want a tax-free Christmas gift, you might want to stick to giving crypto-themed socks.”