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Investing in precious metals might seem lucrative, but it can lead to unexpected tax obligations.
Mark Chapman, the Director of Tax Communications at H&R Block Australia, highlighted that while precious metals like gold and silver hold a unique position in Australian investment portfolios, they are often misunderstood in terms of taxation.
“Many investors mistakenly believe that gold and silver are taxed similarly to shares, or think that owning physical bullion is a private matter, escaping the scrutiny of the Australian Taxation Office (ATO),” Chapman explained.
He further noted that some investors assume these assets require a different tax approach because they do not generate income like dividends or rent.
In reality, Chapman clarified, gold and silver fall directly under Australia’s capital gains tax (CGT) regulations.
And the tax outcome can vary depending on what is purchased, why it is purchased, and how it is held.
CGT assets include physical bullion bars, bullion coins, allocated and unallocated bullion accounts, gold and silver exchange-traded funds (ETFs) and shares in precious metal funds.
Chapman said if gold or silver was bought as an investment and later sold for more than its cost, the profit will usually be subject to capital gains tax.
“H&R Block sees a common misconception among investors that holding bullion privately removes tax exposure,” he said.
“In practice, tax applies regardless of whether the ATO is immediately aware of a transaction.
“CGT is triggered when the asset is disposed of, including when bullion is sold, gifted, exchanged, or transferred to another entity. Record keeping is critical, as investors who cannot substantiate their cost base often end up paying more tax than necessary.”
Some gold and silver coins may also fall under the collectables rules, particularly where they have numismatic or collector value.
Chapman cautioned that losses on collectables can generally only be offset against gains from other collectables, limiting their usefulness compared to other investment losses.
“While there are personal use asset exemptions under the tax law, H&R Block notes that investment gold and silver will usually not qualify. Where the asset has been acquired as a store of value or for investment purposes, it is unlikely to be considered a personal use asset,” Chapman said.
“For individual investors and trusts, the 50 per cent CGT discount can be a key tax advantage where gold or silver is held for more than 12 months. Companies, however, are not eligible for the discount.”
Another important consideration he flagged was the distinction between an investor and a trader.
Where there is frequent buying and selling with a clear profit-making intent, gains may be treated as ordinary income rather than capital gains, removing access to the CGT discount and changing the overall tax outcome.
“Gold exposure through ETFs and pooled products is generally taxed under normal CGT rules, but outcomes can differ depending on the legal structure of the product,” Chapman said.
“H&R Block recommends investors carefully review product disclosure statements and annual tax statements before assuming the tax treatment.”
For self-managed super funds (SMFs), additional compliance considerations apply, including storage, documentation, valuation, and investment strategy alignment.
While Chapman said CGT still applies within super, the effective tax rate may be lower for assets held longer than 12 months, but ATO scrutiny in this area remains high.
“Gold and silver may feel like simple investments, but as H&R Block often sees in practice, the tax treatment can be complex,” Chapman said.
“The focus should not be on trying to avoid tax, but on structuring investments correctly and maintaining records so the right amount of tax is paid – and not more.”
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