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Nuisance, not a crisis; Labor’s $3 million super tax misses the mark on crypto
While public discourse rages around Labor’s resurrected Division 296, the 15 per cent levy on unrealised superannuation earnings above $3 million, crypto-heavy self-managed funds remain almost unruffled.
Their trustees know a tax calculated on paper profits can be settled with paper-thin slivers of Bitcoin. When assets are divisible to eight decimal places and trade every second, the moment the ATO comes knocking, the tax becomes a nuisance, not a crisis.
The government still claims only 80,0001 people will be touched, but by refusing to index the threshold, it has baked bracket-creep into the law. Treasury now concedes about 1.2 million Australians will be caught within 30 years2. At current inflation, today’s $3 million will buy little more than a median Sydney house by 2040.
The crypto industry also knows those projections ignore the surge in crypto adoption and price growth, which will push many balances over the cap far sooner.
Division 296 is being sold as a hit on the uber-rich; in practice, it is a slow-moving wealth tax on younger savers- the cohort most comfortable holding digital assets.
For young people, realising an investment property, let alone a first home, is becoming out of reach, there is some comfort. Investors who anchor their SMSFs in property are scrambling.
The national median time on market is above 40 days3, and selling still costs 4-6 per cent in fees. Crypto trustees face no such bottleneck. Offloading 0.05 BTC (about $8000) at today’s prices takes seconds on a licensed Australian exchange and costs less than 0.1 per cent.
For anyone seeking a loophole, Labor has already shut most doors. There is no scope for “creative” asset marking: auditors already warn of a coming surge in rubbery valuations for vineyards, art and beach houses as trustees try to dodge the tax.
Meanwhile, any savvy crypto investor knows if they get a $8,000 tax notice for unrealised gains, they can liquidate a fraction of a Bitcoin before the email loads. Try doing that with half a warehouse or a quarter of a vineyard.
Bitcoin is looking increasingly attractive: its price feed is public and immutable. Plus, most crypto platforms now integrate with “middleware” crypto tax software that performs tax calculations, meaning accountants can pipe that data straight into SMSF administration software like BGL and Class.
At Coinstash, thousands of SMSFs are investing their retirement portfolios in Bitcoin, Ethereum and other digital assets. Very few are panicking about unrealised gains tax because cryptocurrency solves the two problems that keep my phone buzzing whenever the policy lurches forward: liquidity and valuation certainty.
Division 296 is budgeted to raise $2.3 billion in 2027-284. That figure was modelled off asset returns that look quaint in a world where Bitcoin has surged over 2000 per cent since COVID lows to above $160,000 today.
If digital assets keep compounding even modestly, far more balances will vault the cap long before Canberra expects. A fresh complication surfaced recently, when a Victorian magistrate found Bitcoin was “akin to money” rather than an investment asset; if higher courts endorse that logic, the ATO and policy makers in Canberra may need to take action to prevent the tax base from shrinking.
This tax becomes murkier when markets fall. The bill is silent on whether trustees who pay tax on a 30 June paper gain receive a refund if that gain evaporates in the following months. Capital-loss offsets may arrive eventually, but cash-flow mismatches will bite, and liquidity once again favours crypto over real estate.
Super has always worked on one implicit promise: play by the rules today and you will be rewarded with a stable, concessional framework tomorrow. Legislating a back-dated charge on paper profits, while refusing to index the trigger, tears up that social contract. If Canberra is prepared to tax unrealised gains, what comes next? It sets a dangerous precedent; if super’s goalposts can shift this quickly, franking credits, managed funds, even the family home, suddenly look vulnerable.
If the tax must stay, then good policy is still possible: index the threshold to CPI, allow immediate credits for unrealised losses, and fast-track the Digital-Asset Platform Bill so accountants can tick compliance boxes without hesitation. Recognising the liquidity benefit of fractional assets instead of forcing retirees to hawk paddocks and warehouses would show Canberra understands the future of capital markets.
If the bill proceeds unchanged, crypto investors will adapt. An SMSF can hold a modest sleeve of Bitcoin or an AUD-backed stablecoin and meet the ATO’s bill with three smartphone taps.
This tax, conceived to curb wealth hoarding, may end up accelerating migration to the only asset class that turns a cash-flow crunch into a momentary inconvenience (and a headache for the ATO). That irony should not be lost on legislators.
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