Australia’s planned removal of the 50% capital gains tax (CGT) discount from July 1, 2027, could substantially increase the taxable portion of investment gains, including those from cryptocurrency. The change was announced in the government’s May budget, according to the report, and would replace the existing discount with an inflation adjustment to the asset’s cost base.
Under the new rules described in the report, gains would be taxed at an investor’s income tax rate. The cited rates are 30% for income and gains between A$45,000 and A$135,000, 37% on the portion between A$135,000 and A$190,000, and 47% above that. Low-income earners who are not receiving welfare would face a minimum 30% rate, the report says.
The difference could be significant for assets whose returns come mainly from price appreciation. In one example, an investor who bought Bitcoin for A$10,000 and sold it for A$100,000 after ten years would have about A$3,439 of inflation-related relief. The report estimates that the taxable gain would rise from A$45,000 under the current discount to A$86,561 under the proposed system.
One option covered is holding crypto through a self-managed superannuation fund (SMSF). Retail super funds do not offer direct crypto investment, so investors seeking this approach would need to establish an SMSF. The report says these funds involve compliance requirements, audits and fees that typically run from A$2,000 to A$4,000 a year, although some online providers may bring costs down. Investors also need to account for contribution limits and the tax due when selling crypto before transferring funds into an SMSF.
The approach may be more suitable for older or wealthier investors, the report notes, because money in superannuation generally cannot be accessed until retirement. Investors over 60 can access their investments tax-free, according to the article. Crypto adviser Ben Simpson cautioned against putting retirement savings into short-term altcoin investments.
Another strategy is borrowing against Bitcoin rather than selling it. Lenders cited in the report offer crypto-backed loans, but borrowers face interest costs, relatively short loan terms and the possibility of a margin call or liquidation if the collateral loses value. One provider’s loan-to-value ratio is around 40%, the report says.
Tax treatment can also be uncertain. Crypto Tax Australia director Adrian Forza said some decentralized finance borrowing arrangements may trigger taxable events when one token is exchanged for another. The article describes loans from centralized lenders as a grey area, noting that the Australian Taxation Office has not clarified their status. It also reports that Vield has a private ruling stating its product is not a taxable event, while Swyftx said it does not have such a ruling and advised clients to seek tax advice.
Other possibilities raised include selling before the new rules take effect, voting for parties that have pledged to reverse the changes, or relocating overseas. The report cautions that prices are unpredictable and that borrowing against crypto can be risky, particularly for investors without substantial financial reserves. Further strategies, including setting up a company or leaving Australia, were reserved for a planned second part of the report.
Sources: Cointelegraph.