- Australia is reportedly preparing to replace its long-standing 50% capital gains tax discount with an inflation-indexed model that would also apply to crypto assets.
- Industry participants warn the proposed reforms could weaken incentives for crypto investment and start-up formation in Australia.
- The reported tax changes come as the government continues expanding regulation of digital asset businesses and custody providers.
The Australian government is expected to unveil proposed changes to capital gains tax tonight, with cryptocurrencies among the assets likely to be affected under the reported reforms.
According to local media reports, the current 50% discount applied to assets held for more than a year would be replaced by an inflation-based system that adjusts gains according to price rises over time. The approach mirrors the capital gains framework Australia used before 1999.
A transition period is reportedly being considered, allowing assets bought after budget night to remain eligible for the existing discount until mid-2027 before the new rules take full effect.
The proposed changes have emerged as digital assets become increasingly common among Australian investors. Reports state that the global cryptocurrency market is estimated to be worth US$2.8 trillion (AU$3.92 trillion), while up to a quarter of Australian investors are believed to hold crypto assets.
Related: NSW Police Pull Off One of Australia’s Largest Bitcoin Busts in History
Market Participants Question Proposed Changes
Industry figures have expressed concern about how the reforms could influence investment decisions. Tuan Van Le of Challenger Law said a return to the older indexation model may make it less attractive for people to establish crypto start-ups, particularly where employee equity is used as part of compensation structures.
John Storey, tax counsel at the Tax Institute, said crypto assets are generally treated the same as other investments for capital gains tax purposes, despite some specific differences in how they are handled. He added that early indications suggest any changes would apply broadly across asset classes.
The reports come as Australia advances wider regulation of digital assets, including legislation requiring digital asset and tokenised custody platforms to obtain financial services licences.
Related: Morgan Stanley’s Bitcoin ETF Defies Market Slump With Zero Outflow Streak
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