How Aussie Bitcoiners can avoid 2027’s shock CGT hike: Part 1

The Australian government’s decision to scrap the 50% capital gains discount for all investments in the May budget came as a big shock for crypto owners. The new scheme effectively doubles the taxable component of a gain, minus a small discount for inflation.

But there are legal ways to minimize the amount of CGT you’ll have to pay — if you start prepping now.

Some Aussie crypto holders are taking drastic measures — like Finder founder and crypto king Fred Schebesta who is relocating to Singapore which offers 0% CGT, stating the tax changes were a “killer blow.”
But there are less dramatic methods to reduce your CGT bills including setting up a self managed super fund (SMSF), a company to trade crypto at the company tax rate, or to just cross your fingers and hope the opposition will reverse the changes after the next election.

Source: YahooFinance

Since 1999, Aussie asset owners have only paid tax on half of their capital gain. From July 1, 2027 they’ll pay their full income tax rate — which means 30% CGT if your income and gains are between A$45,000 and $135,000, 37% for the portion between $135,000 and $190,000 and 47% above that. (All figures in this story are in Aussie dollars)

Adding insult to injury, low-income earners who aren’t on welfare like students and retirees will pay a minimum 30% CGT rate no matter how little the gain.

The only discount now available accounts for the effect of inflation on your cost basis. So if you buy a house for $1 million in 2027 and sell it for $1.5 million after 10 years, with inflation at 3%, you won’t have to pay tax on the $344,000 or so attributed to inflation.

“The challenge for cryptocurrency is that the CGT changes, indexation really helps slower growing assets not fast ones,” explains Andrea Yuen, Swyftx CEO.

So if you bought Bitcoin for $10,000 and sell it ten years later for $100,000, the inflation discount is only around $3,439. Under the old system you would pay tax on $45,000 of gains. Under the new system you’ll pay tax on $86,561 of gains.

Stockspot analyst Chris Bryki compared how ten different asset classes would fare under the new rules.
“Crypto sits at the bottom because almost its entire return comes from capital growth,” he wrote in The Australian newspaper.

“An already speculative investment is about to become less rewarding after tax.”

Here are a few different strategies to help crypto holders deal with the changes, ranging from little to no effort, to restructuring your entire life.

Any gain you’ve made before July 1 2027 will be taxed under the existing 50% discount scheme. So your best bet is to hope a raging bull market pushes the value of your portfolio as high as possible before that date.
You should faithfully record the value of every crypto asset you have that day, as any gain from that value will be taxed at the higher rate.

Ben Simpson, founder of crypto advisory service Collective Shift, says Bitcoin’s performance since mid-year in a challenging macro environment bodes well for further gains before July.

But Simpson (who points out he’s not a financial advisor) adds, “I probably wouldn’t be betting the farm on the fact that we’re gonna have a huge bull run”

“I think the halving in May 2028 is where we’ll see most of the returns. So I don’t think it’s going to work in investors’ favor.”

Yuen notes that prices aren’t within your control. “A strategy isn’t a strategy if you’re just sort of hoping,” she says.

Both the official opposition The Coalition, and the insurgent opposition One Nation, have promised to reverse the changes. Crypto voters who feel strongly enough about this single issue, could vote for a change in government.
However, the ruling ALP holds 94 out of 150 seats in the House of Representatives and will be difficult to dislodge from office. If the government does change — and the legislation can pass the Senate in time — it’s technically possible the changes could be reversed before anyone has to file taxes from July 1 2028.

But it’s probably more likely that any change to the system would occur after that date. Adrian Forza, director of Crypto Tax Australia, says this would make calculating gains very difficult.

“It would be a nightmare to do three calculations, but longer term, it’ll be better for the public.”

Australian retirement funds are called superannuation funds, and once you are over 60 you can access your investments tax-free — even as they keep growing.
Unfortunately none of the retail super funds allow clients to invest in crypto, so if you want to protect your crypto gains using this method, you’d have to set up an SMSF. About a third of Simpson’s high net worth clients invest in crypto via SMSFs.
“Buying Bitcoin and accumulating it there is a super solid idea,” he says, although he cautions against adding many altcoins. “You’re risking your retirement, which is an ultra long-term hold, on short-term altcoins,” he says.

Australian super fund AMP has invested in Bitcoin — but doesn’t allow its clients to do so.

The big drawback with SMSFs — explains the 27-year-old founder — is that younger crypto investors can’t access the money for decades.

“You can’t touch it until you’re in retirement, right? So you can’t really utilize any of those gains until later in life.”

Realistically then, it’s a strategy more suited to wealthier investors aged over 50, who have a shorter period to wait.