Demand for gold and silver has skyrocketed in recent months with prices hitting record highs as Aussies turn to the “safe haven” of precious metals and others chase speculative gains. But recent buyers are being reminded about the often overlooked tax implications of the current frenzy.
Gold and silver investments, including physical bullion bars, bullion coins, bullion accounts and of course ETFs and shares, all sit inside the capital gains tax rules. That means if you buy gold or silver as an investment and later sell it for more than it cost you, the profit will usually be subject to capital gains tax.
H&R Block director of tax communications Mark Chapman told Yahoo Finance the “biggest misconception” was that physical bullion was “private” and therefore outside the ATO’s line of sight.
“A common investor mindset is: ‘I bought a few bars, kept them at home, and sold them later — no one will know’,” Chapman said.
But there are two big issues with this.
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Firstly, tax will apply regardless of whether the ATO is immediately aware of the transaction. A capital gains tax event will be triggered when the asset is disposed of, including when bullion is sold, gifted, exchanged or transferred.
Secondly, the ATO can know more than most people think.
“Many bullion dealers have reporting obligations, banks capture transaction trails, and lifestyle audits often pick up unexplained wealth,” Chapman told Yahoo Finance.
“More importantly, from a risk perspective, the investor who doesn’t keep records is the one who ends up paying more tax, because they can’t substantiate their cost base.”
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Gold prices have climbed above $US5,000 an ounce and rallied as high as $USD5,500, while silver briefly hit $US120 and is now trading at over $US80 an ounce.
The run-up in price has sparked queues of people lining up to buy gold and silver, with ABC Bullion seeing long daily lines outside its Sydney store and other locations in recent months.
The “key tax advantage” for most individual investors will be the 50 per cent capital gains tax (CGT) discount, Chapman said.
“If you are an individual (or trust), hold the gold/silver for at least 12 months, and the gain is capital in nature, then you may be eligible for the CGT discount,” he said.