Ask Noel: is Bitcoin a good investment?

Recently, at a party, some friends and I were discussing Bitcoin. I was highly sceptical but they were boasting about the profits they have made in the last year. Just wondering what you think.

In my opinion, Bitcoin fails every investment test. If you buy government bonds, you receive a guaranteed income plus principal repayment at the end of the term. If you buy shares you can make a decision based on the financial statements and profitability of the company. If you buy real estate there should be a nexus between the land value, the cost of improvements, and any potential rental income. In other words, you are making the decision on concrete information.

Bitcoin works on the greater fool theory: a fool buys today in the hope of on-selling to a greater fool tomorrow. It's more like the allegory of the box of strawberries sold from person to person at ever-increasing prices. Finally, the buyer who had paid $100 for a box of strawberries that had cost only $5 a few buyers ago, stopped the cycle by opening the box. To his dismay he found the strawberries were rotten! When he complained, the response was, "but these strawberries were meant to be sold - they were never meant to be eaten". Each buyer had bought with one aim - to resell for a higher price to a fool who still believed in the impossible dream. At least your Bitcoins can't rot. They never really existed.

I am 58 and receive a Comsuper pension of over $100,000 and therefore notionally exceed the pension cap of $1.6 million. I also have $150,000 in a super fund still in accumulation phase. I plan to keep the super fund in accumulation phase and draw out funds in lump sums as required after I turn 60. Can I still make a tax-deductible contribution of up to $25,000 to the super account despite exceeding the cap?

The prohibition on contributions to superannuation for people who exceed the pension is just for non-concessional contributions. Therefore, you could still make a concessional contribution up to $25,000 irrespective of your pension account balance. Just bear in mind this includes concessional contributions from all sources in the year.

I have started to do some homework on aged care for my elderly parents, in their early 90s, should they need or want it. They are self-funded retirees currently living independently. In general terms would they be better to pay the refundable accommodation deposit (RAD) rather than the non-refundable daily accommodation payment? How negotiable are facilities on reducing the RAD? They may also have to pay the means-tested care fee - do the annual and lifetime caps apply per person or per couple?

Rachel Lane of Aged Care Gurus says that at this time of the year a number of the retirement living and aged care groups have special offers whereby they discount RADs, additional service fees and sometimes even the basic daily fee. The offers vary from one facility to the next and may be different for different rooms within the facility, it is certainly worth asking the question. As far as the means-tested care fee goes, the annual and lifetime limits are per person, and the lifetime includes any previous contribution to a home care package through the income tested care fee.

I have two rental properties that I was thinking of selling when I retire. At that time my only income will be from my self-managed super fund which I understand under current rules is not liable to tax. If I have no taxable income would I pay capital gains tax (CGT) or if I do, would my CGT be reduced because I have no taxable income? In short is there a benefit waiting until I retire to sell up or should I just do it now as there is no benefit in waiting?

Capital gains tax is calculated by adding the net gain, after adjustment for the 50 per cent discount if applicable, to your taxable income in the year the sales contract is signed. Therefore, by timing the sale to a period when your taxable income should be low, capital gains tax can be minimised. Furthermore, if you are eligible to contribute to superannuation after you retire from your present job, you could take advice about making a concessional contribution which would be tax-deductible and so reduce taxable income and possibly capital gains tax. I think a major factor in your decision regarding timing of the sale should be the potential of the properties. If they have strong potential, and are providing a good income, I don't see any reason why they should be sold in a hurry.

Noel Whittaker is the author of Making Money Made Simple and numerous other books on personal finance. His advice is general in nature. Readers should seek their own professional advice before making decisions. Twitter: @noelwhittaker

This story Ask Noel: is Bitcoin a good investment? first appeared on The Sydney Morning Herald.