Australia to End 50% Crypto CGT Discount in Major Tax Shift

Australia’s government plans to replace the 50% capital gains tax discount with an inflation-based calculation, according to reports on its upcoming 2027 budget. The change, set to be detailed on Tuesday, will affect crypto and other assets held for more than 12 months.

The new policy, first reported by the Australian Financial Review, would tax the full real gain on an asset, adjusted for inflation over the holding period. This marks a significant departure from the current system, which allows investors to cut their taxable capital gain in half for assets held longer than a year.

Under the proposed rules, the tax on some productive assets could effectively double from about 23.5 percent to nearly 47 percent for high-income earners. The changes are slated to take effect in July 2027, with a one-year grace period. Assets purchased before May 10, 2026, will be partially exempt, with the final tax calculated proportionally under both regimes.

The move could drive capital away from businesses and digital assets like cryptocurrency and into tax-free primary residences, warned Chris Joye, a portfolio manager at Coolabah Capital Investments. The policy shift presents a major new variable for Australia's crypto market, with investors now facing a hard deadline to reassess long-term holding strategies before the new rules begin.

Investors Weigh Tax Impact

The proposed tax overhaul has drawn mixed reactions. Joye argued the change would disincentivize investment in productive sectors. "After the budget doubles the capital gains tax on productive businesses and assets... investors will understandably pull money from businesses, shares, commercial property and rental housing and plough it into their tax-free owner-occupied home,” he said in a post on X.

However, Scott Phillips, chief investment officer at The Motley Fool, suggested the impact might be overstated. He argued that while investors will likely pay more tax, the underlying investments would still need to be highly profitable to generate large capital gains in the first place. "Implicit in that argument is that those groups will be making a motza in the first place. That's all the incentive they will need," Phillips said.

Transition Period and Exemptions

The government’s plan includes a one-year grace period for assets acquired after May 10. During this transition, the existing 50 percent discount will still be applicable. For assets purchased before this date, the final capital gains tax will be calculated on a pro-rata basis, factoring in the holding period under both the old and new tax systems.

This grandfathering provision aims to soften the transition for existing long-term investors. However, it also creates a complex calculation for assets held across both periods and may accelerate selling decisions for some investors looking to realize gains under the more favorable existing regime before it is phased out entirely in July 2027.

This article is for informational purposes only and does not constitute investment advice.