How the Australian CGT Tax Changes Affect Borrowing Against Your Bitcoin or Other Crypto Assets

What Changed in the 2026 Australian Budget?

The 2026 Australian Federal Budget introduced the most significant changes to capital gains tax (CGT) in over two decades. Starting 1 July 2027, the government is:

1. Replacing the 50% CGT discount with cost base indexation for assets held over 12 months
2. Introducing a 30% minimum tax rate on net capital gains calculated under the new indexation method
3. Bringing pre-1985 assets into the CGT net for the first time
4. Applying these changes to ALL CGT assets — not just property, but shares, crypto, and every other capital asset

These changes apply to individuals, trusts, and partnerships. Superannuation funds retain their existing CGT discount (at this stage), and the main residence exemption remains unchanged.

How the Old System Worked

Under the current rules (which apply to disposals before 1 July 2027):

• If you buy Bitcoin at $10,000 and sell it at $110,000, your capital gain is $100,000
• If you held it for more than 12 months, you apply the 50% CGT discount — so only $50,000 is assessable
• That $50,000 is added to your taxable income and taxed at your marginal rate (up to 45% + 2% Medicare levy)
• Effective tax on the gain: approximately 23.5% (at top marginal rate) due to the 50% discount

For crypto investors who bought Bitcoin at $1,000 or $5,000 years ago, the 50% discount significantly reduced the tax on enormous gains.

How the New System Works (From 1 July 2027)

Under the new rules:

Cost Base Indexation

Instead of a flat 50% discount, your cost base is adjusted for inflation (using CPI):

• You buy Bitcoin at $10,000 in 2020
• By the time you sell in 2028, CPI has increased by approximately 30%
• Your indexed cost base becomes $13,000
• If you sell at $110,000, your indexed capital gain is $97,000 (not $100,000)

The indexation only accounts for the actual inflation that occurred — it does not halve your gain like the old 50% discount did.

30% Minimum Tax Rate

A minimum 30% tax rate applies to net capital gains calculated under the indexation method. This means:

• Even if your marginal tax rate is lower than 30%, you will still pay at least 30% on capital gains
• If your marginal rate is higher than 30%, you pay the higher rate
• Income support recipients (including Age Pension) are exempt from the minimum rate

Real Impact on Crypto Holders

Let us compare the old and new systems for a typical Australian crypto investor:

Scenario: Bought 1 BTC at $10,000 in 2020, sell at $110,000 in 2028

The tax bill nearly doubles under the new system for long-term crypto holders.

For someone who bought Bitcoin at $1,000 in 2017 and sells at $110,000 in 2028:

The earlier you bought and the more your crypto appreciated, the harder you are hit by these changes.

Why Borrowing Against Your Crypto Now Makes More Sense Than Ever

Here is the critical insight: borrowing against your crypto is not a disposal. It does not trigger a CGT event.

When you deposit Bitcoin as collateral for a loan, you are not selling it. You are not disposing of it. You are pledging it as security — similar to using your house as security for a mortgage. The ATO has confirmed this principle through private binding rulings on crypto-backed lending products.

This means:

Under the Old System

• Selling $100,000 of Bitcoin gains → ~$23,500 tax (with 50% discount)
• Borrowing $60,000 against same Bitcoin → $0 tax
• Tax saving: $23,500

Under the New System (Post July 2027)

• Selling $100,000 of Bitcoin gains → ~$45,590 tax (with indexation + 30% minimum)
• Borrowing $60,000 against same Bitcoin → $0 tax
• Tax saving: $45,590

The tax advantage of borrowing instead of selling nearly doubles under the new rules. This transforms crypto-backed lending from a nice-to-have tax strategy into an essential tool for any Australian crypto investor with significant unrealised gains.

The ATO Position on Crypto-Backed Loans

In late 2025, the ATO issued a Private Binding Ruling (Authorisation Number 1052452380351) confirming that a properly structured crypto-backed loan does not trigger CGT for the borrower. The key requirements were:

1. Beneficial ownership remains with the borrower — the collateral is security, not a sale
2. The borrower retains the right to reclaim the exact same assets on repayment
3. The arrangement is structured as a genuine loan, not a disguised disposal

This ruling specifically addressed crypto assets and provides a strong precedent for the industry. While Private Binding Rulings only bind the ATO in relation to the specific taxpayer, they indicate the ATO's current thinking on these arrangements.

How CoinExchange.Cash Lending Aligns

On CoinExchange.Cash, crypto-backed loans are structured using 2-of-3 multisig escrow:

• Your collateral is locked in a multisig address — it is not transferred to the lender
• No single party (borrower, lender, or platform) can access it unilaterally
• On repayment, your exact collateral is released back to you
• The arrangement is a genuine secured loan, not a disposal

This structure aligns with the principles outlined in the ATO ruling, though you should always consult your own tax advisor for specific advice.

Practical Strategies for Australian Crypto Holders

Strategy 1: Borrow Instead of Sell

If you need cash, borrow against your crypto at a conservative LTV ratio (30–50%) instead of selling. You access the liquidity you need without triggering a CGT event.

Example: You need $50,000 for a home deposit. Instead of selling Bitcoin and paying $23,000–$45,000 in CGT, you borrow $50,000 against your BTC. Even at 12% annual interest, you pay $6,000 per year — far less than the tax bill, and you keep your Bitcoin.

Strategy 2: Realise Gains Before 1 July 2027

If you are planning to sell some crypto anyway, consider doing it before the new rules take effect. The 50% CGT discount still applies to disposals before 1 July 2027. This gives you approximately 14 months (from May 2026) to use the more favourable old rules.

Strategy 3: Use the Transitional Rules

The government has confirmed that transitional arrangements will apply. Only gains arising on or after 1 July 2027 are subject to the new rules. Gains realised before that date continue to benefit from the 50% CGT discount.

For assets held across the transition, the method for apportioning gains is yet to be fully detailed — watch for the draft legislation expected later in 2026.

Strategy 4: Rolling Loan Strategy

Some sophisticated investors use a rolling loan strategy:

1. Borrow against crypto for immediate needs
2. Repay the loan gradually from income
3. When the loan is repaid, borrow again if needed
4. Your crypto stays invested throughout, growing over time
5. If you eventually want to exit, wait for a year when your income is lower to reduce the tax rate

Strategy 5: Combine with Offset Strategies

If you have capital losses from other investments, you can offset these against capital gains. Under the new system, capital losses are still deductible against gains. If you have loss-making crypto positions, consider selling those (to crystallise the loss) while borrowing against your profitable positions.

What About Interest Deductions?

Under Australian tax law, interest on borrowed funds may be deductible if the borrowed funds are used for income-producing purposes. This means:

• If you borrow against BTC and use the funds to buy shares that pay dividends → interest may be deductible
• If you borrow for personal use (home deposit, car, etc.) → interest is NOT deductible
• If you borrow to invest in a business → interest may be deductible

Consult your tax advisor about the deductibility of interest in your specific situation.

Frequently Asked Questions

Do the CGT changes apply to crypto?

Yes. Cryptocurrency is a CGT asset in Australia. The ATO has consistently treated crypto disposals as CGT events, and the 2026 budget changes apply to all CGT assets including crypto.

When do the new rules start?

1 July 2027. Any crypto sold before this date still qualifies for the existing 50% CGT discount (if held over 12 months).

Is borrowing against crypto legal in Australia?

Yes. Crypto-backed lending is legal and operates within existing financial frameworks. The ATO has provided guidance confirming that properly structured crypto loans do not trigger CGT.

What if my collateral is liquidated?

Liquidation of collateral does constitute a CGT event — the crypto is being disposed of. This is one of the key risks to manage. Use conservative LTV ratios to minimise liquidation risk.

Will the 30% minimum rate apply to liquidation gains?

If your collateral is liquidated after 1 July 2027, the gain would be subject to the new rules including the 30% minimum rate (if applicable). This makes avoiding liquidation even more important under the new system.

Should I sell my crypto before July 2027?

This depends on your individual circumstances. If you were planning to sell regardless, doing so before 1 July 2027 lets you use the 50% discount. But if you are a long-term holder, borrowing against your crypto may be a better strategy than selling at all.

Important Disclaimer

This article provides general information only and does not constitute financial or tax advice. The 2026 budget announcements are subject to the passage of legislation, and the specific details may change. Australian tax law is complex and your circumstances are unique. Always consult a qualified Australian tax advisor or accountant before making decisions based on this information.

The Bottom Line

The 2026 Australian CGT changes make selling crypto significantly more expensive for long-term holders. The effective tax rate on crypto gains will nearly double for many investors once the 50% discount is replaced by indexation and the 30% minimum rate.

Borrowing against your crypto instead of selling is now the most tax-efficient way to access liquidity from your crypto holdings. The tax saved by avoiding a CGT event can easily exceed the interest cost of a crypto-backed loan — especially for investors with large unrealised gains.

With non-custodial P2P lending on CoinExchange.Cash, you can borrow against your Bitcoin or other crypto with the security of 2-of-3 multisig escrow, transparent terms, and no platform custody risk.

• Start Borrowing →
• Read: Borrow Against Your Bitcoin — Complete Guide →
• Crypto Tax Optimization for P2P Traders →