Income tax: capital gains: is Australian currency a CGT asset under section 108-5 of the Income Tax Assessment Act 1997 (ITAA 1997) if it is used as legal tender to facilitate a transaction?

No. Australian currency, being Australian notes issued by the Reserve Bank of Australia or Australian coins issued on the authority of the Federal Treasurer, is not a CGT asset under section 108-5 of the ITAA 1997 when it is used as legal tender. In this circumstance, Australian currency serves as a medium of exchange to facilitate a transaction.

Accordingly, no capital gain or capital loss arises from Australian currency when it is used as legal tender.

Grant pays $10,000 in Australian notes to purchase a painting from Debbie. The tendering of the notes is a legal tender that facilitates the sale/purchase of the painting. The tendered notes would not be CGT assets. Grant will not make a capital gain or capital loss from the notes.

This Determination does not deal with the question whether Australian currency is a CGT asset in other circumstances.