Australia Crypto Investors Face Possible CGT Tax Hike

• Treasury may replace Australia’s 50% CGT discount with inflation indexation.
• Treasury estimates CGT concessions cost Australia AUD 21.8 billion yearly.
• Australia may limit negative gearing tax benefits to newly built homes under proposed reforms.

Australia’s government is considering major changes to capital gains tax (CGT) and negative gearing ahead of Tuesday’s Federal Budget, sparking debate across the investment sector.

During an appearance on Sky News, Treasurer Jim Chalmers said the proposed reforms seek to tackle housing affordability and “intergenerational unfairness”. However, critics argue the changes could increase taxes on shares, crypto, and investment properties.

Australia May Replace 50% CGT Discount

Treasury is reportedly considering reducing Australia’s 50% CGT discount or replacing it with an inflation indexation model. Under current rules, Australians who hold assets for more than 12 months only pay tax on half of their capital gains. The remaining amount is taxed at their normal income tax rate.

For example, someone who buys a house for AUD 500,000 and sells it for AUD 700,000 records an AUD 200,000 gain. With the current discount, only AUD 100,000 becomes taxable income.

Treasury estimates the CGT discount will cost the government AUD 21.8 billion in forgone revenue during the 2025–26 financial year.

However, Treasury is now considering returning to an inflation indexation system, which could increase tax bills for long-term investors. Notably, this system was in use before 1999.

Using Treasury’s example, an investor selling an AUD 700,000 property purchased for AUD 500,000 could pay tax on roughly AUD 121,000 in gains after inflation adjustments.

Negative Gearing and Housing Impact

The government is also reviewing negative gearing rules. Negative gearing allows investors to deduct investment losses from taxable income. Analysis by the Parliamentary Budget Office estimates the policy will cost AUD 7.4 billion in lost revenue in 2025–26 across about 1.1 million taxpayers.

Additionally, reports suggest the government may limit negative gearing benefits to newly built homes to support housing supply.

Economists at Commonwealth Bank estimate the combined reforms could generate AUD 20 billion in additional revenue over 10 years while lowering house prices by 3% to 6%.

Crypto Investors Could Face Higher Taxes

The proposed reforms would also affect crypto investors because digital assets fall under Australia’s CGT rules.

Currently, Australians who hold cryptocurrencies like Bitcoin or Ethereum for more than 12 months qualify for the same 50% tax discount applied to shares and property investments.

If the discount is reduced or removed, crypto investors could face higher taxes on long-term gains.

Critics say the changes may disproportionately affect younger Australians, who increasingly rely on crypto, shares, and ETFs to build wealth as housing prices continue to rise.

Investors Warn About Broader Economic Risks

The proposals have drawn criticism from investors and business leaders. Asset manager Geoff Wilson said the reforms could hurt younger Australians who use shares and ETFs to build wealth.

Wilson claimed an investor contributing AUD 10,000 annually for 50 years at a 15% annual return could grow their portfolio to AUD 10.84 million. He estimated taxes under the proposed system could exceed AUD 5 million.

Portfolio manager Christopher Joye warned the reforms could push investors away from businesses and rental housing toward owner-occupied homes, which remain exempt from capital gains tax. The government has not confirmed the final details of the reforms, but the proposals are expected to dominate discussion when the Federal Budget is released on Tuesday.

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