I have just bitten the bullet and invested in Bitcoin (and it has been a wild ride over the past week!).
Judging from what the experts suggest, the price could hit $60,000.
This got me thinking — what tax will I pay on my gains?
If your purchase of Bitcoin was under $10,000, and you’re only using it to pay for goods or services, any capital gain you make will be tax free because the Tax Office considers it a ‘personal use asset’.
However, you’re speculating (i.e. hoping to ‘get rich or die tryin’, as Fiddy Cent says), so you’ll pay tax on any capital gain at your marginal tax rate. Having said that, if you hold on for at least 12 months, you’ll be able to claim a 50% capital gains tax discount.
Even though the Tax Office can’t track Bitcoin, they still want their share of any capital gain you make. So make sure you keep good records (transaction dates, how much you invested, the price you bought and sold for) in case you get audited.
Finally, if you cop a loss on your Bitcoin, you can use it to offset capital gains made that year, or you can carry it forward to offset against gains made in the future. (Losing money on Bitcoin? That’s never going to happen, right?)