Black Swan Capitalist Co-founder Vandell Aljarrah Warns That Australia’s Tax on Unrealized Gains Will Undermine Long-Term Crypto Investment Strategies

On June 2, Black Swan Capitalist co-founder Vandell Aljarrah shared his view on the Australian tax on unrealized gains. He commented on the government’s plan to tax gains inside superannuation accounts exceeding 3 million AUD. The co-founder described this measure as evidence of a financial system under strain. He warned that small targeted policies often expand over time. According to Aljarrah, this change may pave the way for other forms of wealth to be taxed. He suggested that this development could influence future policy decisions.

Aljarrah Argues Unrealized Gains Tax Sets A Risky Global Precedent

Vandell Aljarrah noted that the tax applies only to superannuation accounts exceeding 3 million AUD. He expressed concern that this limit could shift as balances grow through inflation and market changes. Aljarrah argued that taxing unrealized crypto gains may set a broader precedent. He warned that governments under financial pressure often search for new revenue sources. This could include long-term crypto investment profits alongside other forms of wealth. Once established, similar measures may be applied more widely to personal investments. Aljarrah referenced examples from countries where taxes expanded over time.

He also noted an imbalance when unrealized gains get taxed, but unrealized losses are ignored. He said this undermines the risk-reward principle behind long-term investment strategies. Investors accept volatility in pursuit of higher returns over extended periods. Without loss offsets, individuals may face taxes on gains without protection during downturns. This could discourage risk-taking and undermine long-term investment outlooks. He said taxing unrealized gains alone reduces financial planning flexibility. This tax may alter investor behaviour and market dynamics.

Expanding Tax Scope Beyond Superannuation is Possible

Aljarrah responded to a community member who pointed out the tax’s current superannuation focus. He agreed but reiterated that targeted policies often grow beyond initial limits. He cited examples where narrow measures expanded into broader tax regimes. Black Swan Capitalist co-founder Vandell Aljarrah warned that governments facing budget shortfalls may impose taxes on unrealized crypto gains. He suggested investors remain vigilant about possible tax scope changes over time. According to Aljarrah, current limitations do not guarantee future restrictions. 

The Australian government’s Div 296 law imposes a 15% tax on super earnings above 3 million AUD. While aimed at superannuation, critics see a shift in wealth taxation philosophy. The co-founder noted that without indexation, more Australians will cross the 3 million AUD threshold. Over time, inflation and market gains may lead to wider tax exposure. He warned that this dynamic could impact long-term investment participants as balances increase. According to some analysts, a lack of indexation may create unintended tax burdens.

Liquidity Concerns Grow Over Taxation of Unrealized Assets

Industry voices question the fairness of taxing unrealized crypto gains and illiquid asset holdings. They ask how taxpayers access cash to pay taxes on gains not yet realized. A University of Adelaide report forecasts a liquidity issue rising from 3.1% to 13.5% because of this tax. The same study suggests 49,000 to 50,000 SMSF members may feel the impact annually. Given these findings, attention turns to long-term strategies within superannuation. Some experts warn that altering tax rules could change investment choices.

The Administrative Burden Of Div 296 Assessments 

Implementing this law poses administrative challenges for funds, advisers, and the ATO. Systems must adjust to calculate Div 296 assessments accurately and in a timely manner. Individuals affected by the tax will require guidance to meet obligations on time. Vandell Aljarrah stressed that investors must stay informed about evolving tax policies. He suggested a cautious stance given possible effects on long-term crypto investment plans. This tax may signal shifts in how unrealized gains get treated under tax law. Such changes could influence decisions within personal wealth and retirement planning circles.