Investors with money in everything from cryptocurrencies to wine and even high-end handbags could be caught in planned changes to capital gains tax to be unveiled by Treasurer Jim Chalmers on budget night.
As Chalmers promised the budget would include incentives for the start-up sector and venture capital, investors are increasingly concerned about how any change to CGT will affect returns on assets that have become increasingly attractive to younger Australians.
As this masthead revealed last month, Chalmers will return to the way capital gains were taxed before changes made by the Howard government in 1999.
Before 1999, the value of assets was adjusted for actual inflation, with the CGT applied only to the “real” jump in value. This became a flat 50 per cent discount in a move then treasurer Peter Costello argued would make Australia more attractive to investors, particularly for the share market.
While most focus has been on shares and property, any change will affect new types of assets.
The investment world has changed dramatically since the discount was introduced, with one of the largest being the advent of cryptocurrencies. The global market is valued at an estimated $US2.8 trillion ($3.7 trillion) with up to a quarter of Australian investors thought to hold crypto assets.
Bitcoin, which accounts for more than half of all crypto value, has suffered a steep fall in price since late 2025, dropping from a peak of $US124,310 to around $US81,000 today. But an investor who has held Bitcoin since the start of 2024, when it was selling at $US44,000, is still sitting on an 85 per cent capital gain.
There has also been an explosion in the luxury investment market since the turn of the century as investors sink cash into everything from fine wine to high-end watches and even Hermes’ signature Birkin handbags. In some cases, these purchases can attract CGT.
The secondary market for the Birkin has thrived in the last two decades, with some bags far more valuable second-hand than new, according to Knight Frank’s The Wealth Report 2025 report. The report shows handbags were the best-performing luxury asset class in 2024.
Challenger Law managing director and principal lawyer, Tuan Van Le, said if changes to the CGT extended beyond property then it would likely reduce the incentive of investors to create their own crypto start-ups.
He said many start-ups offered shares to their employees when establishing a business. The tax hit from the pre-1999 system was likely to be more than the current 50 per cent discount.
“If the start-up is successful, they’ll end up paying more tax under the old system than with the discount,” he said.
“It will be less enticing for people to start up their own crypto company.”
Van Le said changes to negative gearing, where the government is considering restricting the number of homes that can be negatively geared, could also encourage people to set up companies to invest in property.
He said while companies cannot negatively gear, the lower tax rate offered under a company structure could encourage investors to structure their financial affairs as a company.
Chartered Accountants ANZ group executive for policy, Geraldine Magarey, said the $500 threshold for assets that attract CGT had not changed since the tax was introduced, arguing it should be indexed.
“Any change to the capital gains tax regime will require taxpayers to understand how the rules apply to them across a broad range of assets,” she said.
“If you sell an asset after only a short period, inflation won’t have moved much, so indexation may give you a smaller benefit than the current discount. But if you hold an asset for many years, more of the gain is just inflation, so indexation can give long-term holders a fairer result.”
Tax counsel at The Tax Institute, John Storey, said ultimately crypto and other assets were the same as any other when it came to CGT.
“There are a few specific quirks that affect those assets, but otherwise they are just taxed like any other investment,” he said.
“We don’t know how any 50 per cent CGT discount changes might affect crypto yet, but early indications are that any changes will apply across the board so crypto will be affected the same as other assets”.
While Chalmers refused to be drawn on how the tax may be changed, he pushed back on suggestions it would hurt start-ups and venture capital.
He said the budget’s tax package would contain “difficult but necessary” reforms with a focus on helping young people get into the property market rather than targeting the investor sector.
“I think what people will see in the budget on Tuesday is a lot of effort, including new policies, to support start-ups and venture capital. We see them as a really crucial part of the economy and increasingly so,” he told Sky News.
“Without pre-empting any announcements in Tuesday night’s budget, there is a focus on start-ups and on venture capital, a positive one.”
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Shane Wright is a senior economics correspondent for The Sydney Morning Herald and The Age.Connect via X or email.
