Canberra is weighing a major rewrite of capital gains tax rules after estimating that current CGT concessions cost AUD 21.8 billion a year. The proposal would replace the 50% discount for assets held longer than 12 months with an inflation-indexed model that could materially increase tax on long-term crypto gains.
The reform matters because crypto assets are already treated by the ATO as property and therefore fall inside the CGT framework. For investors, treasuries and custodians, the proposed shift changes the economics of holding, selling and documenting digital assets across multi-year positions.
Inflation Indexation Would Replace the 50% Discount
Under current ATO practice, crypto assets held for more than 12 months can qualify for a 50% CGT discount on nominal gains. That means only half of the gain is included in taxable income before the investor’s marginal tax rate is applied.
The proposed model would instead tax the gain after adjusting for inflation. In practical terms, the benefit would depend on inflation rather than a flat 50% reduction, making the outcome less generous when inflation adjustments are smaller than the current discount.
For example, a $10,000 nominal crypto gain currently produces a taxable gain of $5,000 after the 50% discount. At a 30% marginal rate, the tax on that discounted gain would be $1,500, while an indexation model would tax the inflation-adjusted real gain instead.
The government is also considering a separate unrealized-gains measure for very large portfolios. That proposal would apply in the 2025–2026 fiscal year to portfolios above AUD 3 million, or about US$2 million, with suggested rates of up to 15% on unrealized value increases.
Transition Window Could Bring Selling Pressure
Christopher Joye, Chief Investment Officer at Coolabah Capital, warned that “the tax changes could redirect capital away from productive investments.” His concern is that higher CGT burdens may push capital toward tax-favored assets such as owner-occupied housing.
Market participants and advisers also expect the transition period to affect investor behavior. If holders anticipate higher tax drag, some long-term crypto investors may accelerate disposals to preserve the current after-tax return profile before the new regime takes full effect.
The operational burden is already significant. The ATO requires detailed transaction records for crypto assets and uses data-matching tools to monitor compliance, meaning wallet histories, exchange statements, staking income and mining proceeds must be reconciled to establish cost bases and holding periods.
Legislative details are expected with the federal budget presentation on May 13. A transitional provision would give assets acquired after May 10, 2026 a one-year window under the current discount, with the full inflation-indexation model scheduled to begin on July 1, 2027.
The proposal tightens the calculus around liquidity, holding periods and tax-adjusted returns. Risk teams will need to rerun models under higher effective tax assumptions and potential selling-induced slippage, especially if concentrated holders move during the transition window.
Custodians and advisers will also face heavier compliance expectations. Preserving cost-basis traceability, documenting counterparty exposure and quantifying market-impact risk will become core operating requirements under a more complex CGT regime.