Australia's new tax reform replaces the 50% capital gains tax discount with inflation indexing, which could increase the tax burden for Bitcoin and Ethereum holders.
It is expected that this measure will be formally submitted. The federal budget on May 12 marks the end of a 27-year system that provided a fixed 50% discount on long-term capital gains.
This change marks Australia’s historical return to the “inflation-indexed” model used before the 1999 reforms, from the 1980s and 1990s. According to leaked information, the new rules will apply to assets purchased after May 10, 2026, and the system is expected to be fully implemented on July 1, 2027.
The current model allows investors to reduce their taxable gains by half if they hold assets for more than 12 months. Under the new proposal, the cost base will no longer use a fixed discount but will instead adjust according to the inflation rate. This means investors will be taxed on their real gains rather than nominal gains.
Cryptocurrency investors may suffer the most severe losses
This reform may most significantly impact investors holding high-risk, high-yield assets such as Bitcoin, Ethereum, and technology stocks. During a strong bull market, the relief from inflation indexing falls far short of the current 50% tax advantage.
An example provided by an Australian tax analyst illustrates how significant this difference is: under the current system, an investor with $100,000 in capital gains would only pay tax on half of that amount. Under the new model, even with an inflation rate of 5%, the taxable profit remains nearly unchanged—resulting in a substantially higher tax burden.
Investors following a long-term hold (HODL) strategy face the highest risk, as the Consumer Price Index (CPI) struggles to compensate for the absence of a 50% discount mechanism for high-growth assets. Meanwhile, individual income tax filing systems will also become more complex, requiring tracking of inflation adjustments for each asset.
The government seeks to increase fiscal revenue and lower real estate prices.
The Anthony Albanese government has defended the reform, citing the need to increase fiscal revenue and aiming to curb housing demand driven by “tax concessions.” It is estimated that the current 50% tax concessions cost the national budget approximately A$20 billion annually.
Although the official focus is on the housing market, crypto assets, ETFs, and stocks are also within the scope of reform, as the cabinet insists on “tax neutrality” across different asset classes.
The government is expected to adopt a mixed transition model for assets purchased before the reform. Under this model, part of the holding period will be taxed under the old rules with a 50% discount, while the remaining portion will be adjusted for inflation.
The market has been closely watching the budget announcement on May 12, as these reforms could trigger significant shifts in investor behavior, particularly in cryptocurrencies and high-yield long-term portfolios.