Australian Bitcoin holders face higher capital gains tax from July 2027

Australian Bitcoin holders face higher capital gains tax from July 2027

From July 1, 2027, Australian asset owners will no longer receive a 50% discount on capital gains. Capital gains tax, or CGT, is the tax paid on profit when an asset is sold.

The report says the change was announced in the May budget. It will replace the discount with a smaller adjustment for inflation.

The report also mentions Finder founder Fred Schebesta, who is relocating to Singapore. The report says Singapore offers 0% CGT and that he called the tax changes a “killer blow.”

Key numbers for the new tax rates

• Since 1999, Australians have paid tax on half of a capital gain.
• From July 1, 2027, they will pay tax on the full gain, minus an inflation adjustment.
• The rate will be 30% if income and gains are between A$45,000 and A$135,000.
• The rate will be 37% for the portion between A$135,000 and A$190,000.
• The rate will be 47% for the portion above A$190,000.
• Low-income earners who are not on welfare will pay a minimum rate of 30%.

Why inflation helps slow-growing assets more

The only discount under the new system will account for inflation on the purchase price. The report gives an example of a house bought for $1 million in 2027 and sold for $1.5 million after 10 years. With inflation at 3%, about $344,000 would not be taxed.

Swyftx chief executive Andrea Yuen said indexation, the inflation adjustment, helps slower-growing assets more than fast-growing ones. In the report’s Bitcoin example, Bitcoin bought for $10,000 and sold after 10 years for $100,000 would receive an inflation discount of about $3,439.

Under the old system, tax would apply to $45,000 of the gain. Under the new system, tax would apply to $86,561 of the gain. Stockspot analyst Chris Brycki said crypto sits at the bottom in his comparison of 10 asset classes because almost its entire return comes from capital growth.

Four approaches described in the report

Recording values before July 1, 2027: Gains made before that date will be taxed under the existing 50% discount scheme, according to the report. Holders are advised in the report to record the value of each crypto asset on that day, as later gains will be taxed at the higher rate.

Seeking a policy reversal: The Coalition and One Nation have promised to reverse the changes, the report says. It also notes the ruling Australian Labor Party holds 94 of 150 seats in the House of Representatives. Crypto Tax Australia director Adrian Forza said a change after July 1, 2028 would make calculating gains difficult.

Using a self-managed superannuation fund: A self-managed super fund, or SMSF, is a retirement fund set up by individuals. The report says retail super funds do not allow clients to invest in crypto. It says annual SMSF costs typically range between $2,000 and $4,000, although online provider Stake can reduce costs to about $1,330 if only Bitcoin or Ether exchange-traded funds are bought. An exchange-traded fund, or ETF, is a fund that trades on an exchange like a share. The report says crypto must be sold and taxed before it can be rebought through an SMSF.

Borrowing against Bitcoin: The report describes lenders including BlockEarner, Vield and Swyftx that allow borrowing against Bitcoin as collateral. Swyftx has a loan-to-value ratio around 40%. Loans typically last 12 months and carry high interest rates, according to the report. Borrowers can face a margin call if collateral falls below a set amount.

Risks and unclear tax treatment for borrowing

Collective Shift founder Ben Simpson, who the report notes is not a financial adviser, said he would not recommend borrowing for someone highly exposed to crypto without capital behind them. The report says Bitcoin is down 28% over the past year, so a borrower from a year ago would have faced margin calls and possible liquidation.

Forza said borrowing in decentralised finance, or DeFi, can be a taxable event. He gave depositing Ether to Aave as an example, where it is swapped to WETH, another token form, and withdrawn again. He said borrowing from centralised lenders such as BlockEarner or Swyftx is currently a grey area.

The report says the Australian Taxation Office has not clarified if that borrowing is a taxable event. Vield is described as the only Australian provider with a private ruling that its product is not a taxable event. Swyftx said it has not received a private ruling and that clients should seek tax advice. BlockEarner did not respond to a request for comment.

Sources

• Cointelegraph