Bitcoin & Capital Gains: A Tale of Two Cities

“When anyone builds a portfolio for younger investors, they rationally load them up with the highest-growth and most volatile assets on the basis that a long investment horizon allows them to weather the inevitable volatility storms… If you allocated $10,000 to bitcoin after the March 2020 pandemic shock – which many young punters did, and which would now be worth approximately $92,000 – the new CGT regime imposes vastly higher amounts of tax.”

Christopher Joye, Economist, Australian Financial Review, 15 May 2026.

Bitcoin & capital gains: a tale of two cities

For many Bitcoin holders, the recently announced changes to the capital gains tax regime were met with a sense of dread. Not only is the Federal government proposing to axe the 50% discount for capital gains on assets held for 12 months or more, but there is also the proposed introduction of a minimum capital gains tax rate of 30% for all taxpayers, including trusts.

As all Bitcoin owners know, it has traditionally been a volatile asset. In some years, like 2017 and 2020, Bitcoin was unstoppable in its price increases, only to be met with stomach-churning price falls in 2018 and 2021. For holders, the pain of the ‘HODL’ was compensated for by the high returns that Bitcoin has generated for them over time. It was never a question that the capital gains tax discount would be there to reward their conviction when it came time to sell, for after all, this type of long-term risk-taking was exactly what the discount was designed for.

Well, the Federal government has now taken a very different view on what type of investors should be rewarded with a discount on their capital gains, proposing to limit this to investors in newly constructed properties and to superannuation funds. For everyone else, we will all pay a minimum of 30% tax on any realised gains on Bitcoin, with many of us paying all the way up to 47% capital gains tax, the highest in the Western world. Indexing our cost base to inflation will give some relief, but as Bitcoin owners know, inflation is kind of irrelevant when the price of Bitcoin does a 5x or 10x over a 4-year period.

The aim of this blog post is not to argue the merits of the proposed changes in the Federal Budget, rather it’s to highlight a strategy that many high-net-worth and ultra-high-net-worth investors have been using for a very long time, and that up until now was out of reach for all other than those fortunate few.

The strategy I am talking about is borrowing against your assets, tapping the equity in those assets to grow your wealth, and doing this without triggering a capital gain that you will soon be taxed up to 47% on.

Let’s take Christopher Joye’s example and assume an Aussie Bitcoin HODLer is sitting on a capital gain of $82,000, having timed their entry beautifully by buying after the pandemic shockwave and having the conviction to remain invested despite enduring up to a 75% peak-to-trough decline in the price of Bitcoin.

Our Bitcoin holder decides to take the profit and diversify into other assets. Under the current capital gains tax regime, having walked the proverbial tightrope over a volcano, our Bitcoin owner would pay a maximum of around $19,200 in capital gains tax, or 23.5%, leaving them with a tidy profit of $62,800, a just reward for that momentous investment risk-taking. If that Bitcoin owner was on the average tax bracket, the tax rate would be even lower, at around 16%, leaving an after-tax profit of around $69,000.

Under the proposed tax regime, our Bitcoin holder would pay a minimum of 30% capital gains tax, or $24,600, significantly reducing their after-tax gain to $57,400, making them almost $12,000 worse off. For a Bitcoiner on the top marginal tax rate, the after-tax outcome is even worse, facing a tax bill of over $38,000, or almost half of their gain.

Unlocking tax-free cash while preserving your Bitcoin exposure – and getting a tax deduction in the process!

Let’s say that instead of selling their stash, our Bitcoiner comes to Ontoro for a loan against their Bitcoin. By borrowing up to 50% against the value of their Bitcoin, they can free up $41,000 of equity, paid to them by Ontoro in Australian dollars directly into their bank account, all without triggering a capital gain. The interest on the Ontoro loan may also be tax-deductible against other income sources, providing an extra benefit for our Bitcoin holder. Best of all, they can maintain their full exposure to Bitcoin, capturing all future price gains.

So, our savvy Bitcoiner has achieved their aim of diversifying their asset mix while also avoiding a tax bill of up to $38,000. They now have $41,000 invested in other assets and still maintain $92,000 of exposure to the best-performing asset of the past decade – Bitcoin.

Is this safe?

Elon Musk has a net worth approaching US$800 billion yet has famously declared himself to be cash poor, with less than 1% of his fortune in liquid funds. Nonetheless, he was still able to pay US$44 billion for Twitter in cash! He did this by borrowing against his assets and using this cash to fund the growth of his asset portfolio.

Now, most of us don’t have the likes of JP Morgan and Goldman Sachs competing to hand us money, and up until now, many Australian Bitcoin holders have struggled to find a safe venue to borrow against their Bitcoin.

Overseas players like Celsius and BlockFi made a big noise back in 2020 and 2021 about offering Australian Bitcoiners ostensibly cheap loans, and then later collapsed, taking borrowers with them through rehypothecation and doing all sorts of naughty things with their Bitcoin. Side note: Ontoro will NEVER rehypothecate your Bitcoin.

Local crypto-lenders like Loda Finance made a splash about being Aussie-based and then promptly folded when the 2021 cycle ended.

Sure, some of the major crypto exchanges will let you borrow against your Bitcoin, but you have no idea what they are doing with it, and that low interest rate that seems too good to be true, well, it probably is. And in the hopefully unlikely event that they go the way of FTX, then you can be prepared to stand in line and hope to get your Bitcoin back!

With Ontoro, you are dealing with an Australian regulated company that believes in keeping it simple and keeping it low risk. There is no decentralised finance or potentially vulnerable smart contracts. We never rehypothecate or do anything funky with your Bitcoin. We don’t lend against anything except Bitcoin. We take security seriously and utilise the highest standards. We were built by founders who have the deepest respect for Bitcoiners and who believe Bitcoin is the path to financial freedom.

Get ahead of the coming changes. There has never been a better time to explore what an Ontoro loan can do for you.