Australia’s plan to abolish the longstanding 50% capital gains tax discount for investments from July 1, 2027 is set to reshape the tax treatment of crypto profits, according to a report focused on the impact on Bitcoin holders. The change was announced in the federal budget and would leave investors paying tax on the full gain at their income tax rate, apart from a smaller inflation adjustment.
The report argues that crypto investors may be hit harder than many other asset owners because a large share of digital asset returns tends to come from price appreciation rather than inflation-linked increases in value. It also outlines several legal approaches some investors may consider to reduce the tax impact, while stressing that each comes with limits, complexity, or uncertainty.
What the new tax rules would change
Under the current system, in place since 1999, eligible asset owners have generally been able to pay tax on only half of a capital gain. From July 1, 2027, that discount is due to be removed, meaning gains would instead be taxed at the investor’s full income tax rate, with only inflation indexation remaining as a reduction mechanism.
The report says that would translate to capital gains tax rates of 30% for incomes and gains between A$45,000 and A$135,000, 37% for gains between A$135,000 and A$190,000, and 47% above that. It adds that low-income earners who are not on welfare would face a minimum 30% CGT burden under the new framework.
Why crypto may fare worse than other assets
The remaining inflation discount is described as more helpful for assets that rise gradually over time. By contrast, the report says fast-appreciating assets such as Bitcoin would still leave most of the gain exposed to tax because only a relatively small part of the increase could be attributed to inflation.
To illustrate the difference, the piece contrasts a property purchase with a long-term Bitcoin investment. A home bought for A$1 million and sold later for A$1.5 million could at least have its tax base reduced by inflation. A Bitcoin purchase rising from A$10,000 to A$100,000 over a decade would receive only a modest inflation adjustment, leaving most of the profit taxable.
Strategies investors may consider before the deadline
One option discussed in the report is realizing gains before the July 2027 start date so they can still fall under the existing 50% discount. That approach depends heavily on market conditions, and the article frames it as a strategy that would work best if a strong crypto rally occurs before the rules change. It also notes the importance of recording asset values to capture gains under the current regime before the legislation shifts.
Another possibility is moving holdings into a self-managed super fund. The article says an SMSF can offer tax advantages in retirement, but warns that setup is complex, costs can be significant, and funds are generally locked away until retirement. It presents this route as more suitable for wealthier investors, particularly those over 50.
The report also mentions the political route: waiting to see whether a future government reverses the measure after the next election. However, it describes that outcome as uncertain and suggests any reversal might not come until after July 2028.
Borrowing against Bitcoin comes with major risks
The article also highlights borrowing against Bitcoin as a way to avoid triggering a capital gains tax event through a sale. Some lenders allow borrowers to use BTC as collateral, which can provide access to funds while the underlying asset remains unsold.
Still, the report presents this as a high-risk strategy. It cites high interest costs, short loan durations, possible margin calls, and the fact that lenders may not advance the full value of the collateral. It also warns that in some decentralized finance structures, borrowing itself may create a CGT event, such as where token swaps occur as part of the loan or withdrawal process. According to the report, tax treatment across centralized lenders is not fully settled either.
What comes next
The article says some crypto holders are already considering larger structural responses, including relocation to lower-tax jurisdictions, and cites Finder founder Fred Schebesta’s move to Singapore, where capital gains tax is 0%. However, it says simpler domestic approaches may be available depending on an investor’s circumstances.
It also notes that this is only the first part of a broader series. A second installment is expected to examine additional options, including using a company structure or leaving Australia altogether. Throughout, the report emphasizes that any tax planning should be discussed with a qualified professional.
Source: cointelegraph.com