Australia to scrap 50% CGT discount for crypto! Switching to inflation-indexed taxation, taxes due even if Bitcoin doesn't rise

The Albanese government in Australia is planning to scrap the current 50% capital gains tax (CGT) discount for crypto assets, shifting instead to an inflation-indexed taxation model—meaning crypto assets held for over a year will be taxed on full real gains, potentially leading to a significant tax hike for long-term holders. (Previous coverage: South Korea’s tax authority spends $2.2 million to introduce AI tax auditing, gearing up for a 22% crypto capital gains tax starting in 2027) (Background: Coinbase x402 integrates AWS AgentCore: Enabling AI agents to autonomously find services, make payments, and complete tasks) The Albanese government is brewing a major tax reform—replacing the current 50% CGT discount for assets held over 12 months with an inflation indexation model, which could significantly increase the tax burden for long-term cryptocurrency investors. According to an exclusive report by the Australian Financial Review (AFR) citing sources, the Albanese government will announce in the 2027 fiscal year budget the removal of the current 50% CGT discount for assets held over 12 months, shifting to an inflation-indexed model—where taxes are levied on all real gains after adjusting for inflation during the holding period. Under the current system, Australian investors who hold assets (including cryptocurrencies) for more than 12 months are entitled to a 50% CGT exemption. If switched to an inflation-indexed model, while price increases during the holding period can be deducted from the tax base, all real gains will be subject to tax—a move that will significantly increase the tax burden for crypto assets, which often see annual growth far exceeding inflation rates. High-income earners hit hardest This reform will have the most significant impact on high-income earners. Under the current system, high-income earners are subject to a top marginal tax rate of 45%, but the 50% discount effectively reduces the actual CGT rate to approximately 22.5%. Under the new system, assuming a 3% annual inflation rate and a 30% annualized growth rate for crypto assets held for five years, the effective tax rate could rise to over 40%. Chris Joye, portfolio manager at Coolabah Capital Investments and AFR columnist, strongly criticized the reform on X. He pointed out that this policy would drive capital away from productive assets and into the tax-advantaged housing market: After the budget doubles the CGT on productive businesses and assets from approximately 23.5% to 46-47%, investors will naturally pull capital out of businesses, stocks, commercial real estate, and rental properties, and shift it into tax-exempt primary residences. The single biggest winner of this budget: tax-exempt primary residences—this is exactly where the capital will flow. Transitional arrangements According to the AFR report, the new system will take effect in July 2027 (the end of the fiscal year), with a one-year grace period for assets acquired after May 10. During the transition, the current 50% discount will still apply. Assets purchased before May 10 will be partially exempt—the final CGT discount will be calculated based on the proportion of the holding period under each respective tax regime. Scott Phillips, Chief Investment Officer at The Motley Fool, holds a more balanced view. He believes that while the tax burden on investors will indeed increase, the profit potential remains substantial: It’s not that the CGT reform won’t hit founders and growth investors—that’s true. But the premise underlying this narrative is that these groups would have earned significant returns in the first place. That in itself is enough of an incentive. It is worth noting that an Australian court ruled last year that Bitcoin is "money" rather than property, sparking discussions on whether cryptocurrencies should be subject to CGT. However, the Treasury subsequently clarified that crypto assets are still taxed as capital gains, and this budget further establishes the direction of replacing the CGT discount with an inflation-indexed model.