Australia's Labor government has proposed replacing the country's long-standing capital gains tax discount with an inflation-indexed model that could raise tax liabilities for crypto investors holding assets over extended periods. According to reports from the Australian Financial Review, the Albanese government plans to remove the current 50% capital gains tax discount as part of a wider package of tax changes tied to investment and housing policy. Under the existing system, Australians who hold assets for more than 12 months can reduce taxable capital gains by half. However, the government has now announced a one-year grace period for the new rules, with assets acquired after budget night continuing to receive the 50% discount until mid-2027.
Instead of the discount model, the proposed framework would tax inflation-adjusted real gains across the full holding period of an asset. As reported by the Australian Financial Review, long-term investors with modest inflation-adjusted returns could end up paying more tax, particularly higher-income earners with exposure to shares, crypto, and commercial assets. Changes outlined in the federal budget are expected to take effect from July 2027, with assets purchased after May 10 receiving a one-year transition arrangement before the new rules fully apply.
The budget will also address negative gearing, which allows investment losses to be offset against taxable income. According to the Australian Financial Review, negative gearing will be grandfathered for landlords who have properties already negative-geared, but only newly built properties will be able to be negative-geared from now on. Existing properties acquired after budget night could still be negative-geared until July 2027, but not after that. These changes aim to address intergenerational inequality facing young Australians, as negative gearing has long been criticised for skewing housing ownership towards investors and away from owner occupiers.
Criticism from market participants surfaced shortly after details of the proposal emerged. According to the Australian Financial Review, Chris Joye, portfolio manager at Coolabah Capital Investments, argued that the changes would discourage investment across productive sectors of the economy. Joye stated that after the budget doubles the capital gains tax on productive businesses and assets from about 23.5% to 46-47%, investors would understandably pull money from businesses, shares, commercial property and rental housing and plough it into their tax-free owner-occupied home. However, Scott Phillips, chief investment officer at The Motley Fool, took a different view, suggesting that investors affected by the changes would still have strong incentives to pursue long-term growth opportunities.
