NORTHERN TAX & FINANCIAL SERVICES
Let’s talk about the only coin you can’t flip.
It is likely you have heard of Bitcoin and other cryptocurrencies, of which have gained significant media attention over the past few months.
For those who don’t understand this concept, a crypto-currency is defined by the Google dictionary as ‘a digital currency in which encryption techniques are used to regulate the generation of units of currency and verify the transfer of funds, operating independently of a central bank’ and as ‘decentralised cryptocurrencies such as bitcoin now provide an outlet for personal wealth that is beyond restriction and confiscation’.
Now the Australian Taxation Office is a little more specific in which crypto-currency they refer to, this being bitcoin, and their guidance is relatively new. The ATO refers to transacting with bitcoin as ‘akin to a barter arrangement, with similar tax consequences’
Their view is that bitcoin is ‘neither money nor a foreign currency, and the supply of Bitcoin is not a financial supply for goods and services tax (GST) purposes’.
Bitcoin is, however, an asset for capital gains tax (CGT) purposes.
Further information can be found at www.ato.gov.au/general/gen/tax-treatment-of-crypto-currencies-in-australia-specifically-bitcoin/
This may give anyone looking to purchase this currency a new perspective.
There are three sides to this coin in space.
There are the advocates. The advocates are the current investors, the miners, the ones that promote the mining in a safe environment, the ones that truly believe this is the next best thing.
Then there are the haters. Those who are risk averse, who do not believe, who are waiting for the penny to drop, and who sit back and expect the crash.
Then there are the fence sitters, those who sit back, wait, assess with no FOMO. FOMO is the concept of Fear Of Missing Out.
2017 was an excellent year for Bitcoin and those betting it would perform with amazing results. But the fence sitters believe that this is a mania of speculation, and have likely witnessed similar booms and busts in the past (for example the tech boom of 2000 and the mining bubble mid-2000s). They are waiting to see what will evolve over time before making any decisions.
What is amazing is, as I write this article, that there is a media frenzy (top stories all over the world in the last 24 hours) such as on news.com.au ‘Bitcoin plunges 25% amid South Korea and China fears’; and on abc.net.au ‘Cryptocurrency crash as Bitcoin and other prices tumble’ for example.
Furthermore, you have some of the richest people in the world coming forward with their opinions on this topic, one of the top ten questioning why would he engage in either a long or short position in something he knows very little about.
Just remember though, that historically we have had instances of booms, and busts, before.
My point here is that you must be educated in this coin space. It’s like anything in life, the more informed you are, the better a decision you are likely to make. And let’s face it, our hard-earned and tangible money is precious, and it takes a long time to generate for most of us. The old sayings ring true, when it is too good to be true, it usually is. Trust your gut instinct as that gut instinct can often be smarter than your brain.
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The information provided is general advice only. We have not considered your financial circumstances, needs or objectives and you should seek the assistance of a qualified advisor before you make any decision regarding any products mentioned. Whilst all care has been taken in the preparation of this material, no warranty is given in respect of the information provided and accordingly Northern Tax & Financial Services Pty Ltd employees or agents shall not be liable on any ground whatsoever with respect to decisions or actions taken as a result of you acting upon such information.