Bitcoin, and indeed crypto madness, has taken the internet firmly in its grasp. And, similar to the 1800’s gold rush, those who move quickly will be laughing all the way to the bank.
One issue of these massive profits, though, is taxation. Once you decide you don’t want to trade anymore, what do you do with your profits?
Here are a few ways to minimize tax on Bitcoin gains.
Firstly, What Does the Taxman Say?
If you are making a profit from Bitcoin, even if it’s not recognised as money as yet, you still need to pay tax on capital gains.
In fact, any type of barter transaction has to be recorded by the tax office. So, if you receive payment by Bitcoin, you must record the following:
- The transaction’s date
- What the transaction was
- The amount in dollars
- Who the other business or person was
If you hold onto your cryptocurrency for more than a year
Similar to property or shares, if you hold your Bitcoin as an investment for more than 12 months, you may be eligible for a 50% CGT discount.
If your cryptocurrency is a personal use asset
If you have purchased Bitcoin to buy services or goods for personal use and the original cost was less than $10,000, any gains are tax free since it’s a personal use asset.
You can learn more about how to buy Bitcoin Australia investors get from Bitcoin Dealers here.
Using cryptocurrency for the barter of services and goods
Let’s pretend you’ve made a massive profit and you have your heart set on the latest sports car. You could try to find a dealer who is happy for you to pay for the car with Bitcoin. But, how do you tell the taxman that you acquired a brand-new, shiny sports car?
Alternatively, you could look for companies that accept Bitcoin as payment for their services.
Load Bitcoin onto a debit card
Some trading companies allow you to acquire a debit card on which to load your Bitcoin. You can then use the debit card to pay for anything you desire, be it coffees, dinners or brand-new jewellery. Just remember that your profits are not then converted to actual cash, but remain cryptocurrency, so you’re still at the mercy of the crypto market value.
Transfer profits to PayPal
If you think you will be using your profits mostly for online services and goods, PayPal is the way to go. On the downside, there are fees involved with transferring and spending.
Pay the bills
You can pay your bills through Bitcoin in Australian dollars.
Claim it was a gamble
Finally, you could always tell the tax office that your delving into Bitcoin was a big gamble. It’s a long shot, but you’re less likely to be audited if you can prove you are not a day trader and this was just a gamble.
Considering that you can make insane profits from Bitcoin, paying a small cut to the taxman might not be as big a deal as it seems. It just means you can buy the Bondi beach home sooner without raising any suspicion.