ADVANCED STRATEGIES • STEP 2 OF 4
See It: Real-World Examples
In theory, theory and practice are the same. In practice, they are not.
— Albert Einstein
Learn how three Australian investors used collateral loans to access liquidity without triggering CGT.
Your Learning Journey
Your Learning Journey
This Step Takes: 20 minutes
Three detailed case studies showing how the "borrow, don't sell" strategy works in practice.
What You'll Learn
See the exact numbers: tax saved, interest paid, and long-term outcomes. Understand the trade-offs and why this strategy is powerful.
Case Study 1: Sarah's Bitcoin Holdings
Software engineer, age 38, needs $75,000 for house deposit
The Situation
Sarah's Holdings:
- • Owns: 5 BTC
- • Purchase price: $20,000/BTC
- • Cost basis: $100,000 AUD
- • Current value: $150,000 AUD ($30k/BTC)
- • Unrealized gain: $50,000
Sarah's Goal:
- • Needs: $75,000 for house deposit
- • Timeline: Within 30 days
- • Tax bracket: 37% (income $120k-$180k)
- • Conviction: Believes BTC will reach $100k+ long-term
Option 1: SELL (Traditional Approach)
The Transaction:
- • Sells 2.5 BTC for $75,000
- • Cost basis: 2.5 × $20,000 = $50,000
- • Capital gain: $75,000 - $50,000 = $25,000
Australian CGT Calculation:
- • Held >12 months → 50% CGT discount applies
- • Taxable gain: $25,000 × 50% = $12,500
- • Tax rate (37% bracket): $12,500 × 37% = $4,625 tax owed
Outcomes:
- • ✅ Cash received: $75,000
- • ❌ Tax owed: $4,625
- • ❌ Net proceeds: $70,375 (short $4,625 for deposit)
- • ❌ Now owns only 2.5 BTC (sold half)
- • ❌ If BTC reaches $100k, she owns $250k worth (lost $250k in upside)
Option 2: BORROW (Smart Approach)
The Loan Structure:
- • Lender: Ledn (reputable crypto lender)
- • Collateral: 5 BTC ($150,000 value)
- • Loan amount: $75,000 (50% LTV - conservative)
- • Interest rate: 10% APR
- • Loan term: Interest-only, no fixed repayment date
Tax Treatment:
- • Loan proceeds: $0 tax (loans aren't taxable income)
- • Collateral pledged: No CGT event
- • Interest payments: NOT deductible (used for personal house deposit)
Year 1 Cash Flow:
- • Loan received: $75,000 (tax-free)
- • Annual interest (10%): $7,500 ($625/month)
- • Sarah still owns: All 5 BTC
The Magic (Long-Term Scenario):
Fast forward 5 years. Bitcoin reaches $100,000:
- • Sarah's 5 BTC now worth: $500,000
- • Total interest paid (5 years): $7,500 × 5 = $37,500
- • She refinances: Borrows $150k at 50% LTV, pays off original $75k loan
- • Pockets $75,000 tax-free (again!) + still owns all 5 BTC
- • Still NEVER paid CGT
5-Year Outcome Comparison
| Metric | Sell | Borrow |
|---|---|---|
| Cash Available (Year 1) | $70,375 | $75,000 |
| Tax Paid | $4,625 | $0 |
| Interest Paid (5 years) | $0 | $37,500 |
| Bitcoin Owned | 2.5 BTC | 5 BTC |
| Portfolio Value (BTC @ $100k) | $250,000 | $500,000 |
| Net Benefit (Borrow vs Sell) | — | +$250,000 |
Sarah's Outcome
Case Study 2: Mark's Gold Holdings
Small business owner, age 45, needs $100,000 for business expansion
The Situation
Mark's Holdings:
- • Owns: 100 oz physical gold
- • Stored at: Perth Mint (allocated storage)
- • Purchase price: $2,000/oz AUD
- • Cost basis: $200,000
- • Current value: $300,000 ($3,000/oz)
- • Unrealized gain: $100,000
Mark's Goal:
- • Needs: $100,000 for business equipment/expansion
- • Business income: $200k/year
- • Tax bracket: 45% (highest bracket)
- • Gold view: Long-term insurance, doesn't want to sell
Option: SELL
Tax Calculation:
- • Sells 33.3 oz for $100k
- • Cost basis: $66,600
- • Capital gain: $33,400
- • CGT discount (50%): $16,700
- • Tax (45%): $7,515
Net: $92,485
Lost 33% of gold holdings + paid $7.5k tax
Option: BORROW
Loan Structure:
- • Lender: Perth Mint
- • Collateral: 100 oz gold
- • Loan: $100k (33% LTV)
- • Interest: 7% APR
- • Annual cost: $7,000
Full $100k + Tax Benefits
Bonus: Interest is tax-deductible (used for business). Saves $3,150/year (45% of $7k)
Mark's Decision
Mark chose to borrow. Why? Three reasons:
- 1. Tax deduction: Interest is deductible because it's for business use. Net cost after tax: $3,850/year.
- 2. Keeps insurance: Gold is his portfolio's crisis insurance. He doesn't want to reduce it.
- 3. Low LTV risk: At 33% LTV, gold would need to fall 50%+ before liquidation risk. Very unlikely.
After 3 years, gold appreciated to $4,000/oz ($400k total). Mark refinanced, paid off the original loan, and pocketed an extra $50k — all tax-free. He still owns all 100 oz.
Case Study 3: Emma's Stock Portfolio
Teacher, age 52, wants to reinvest dividends without selling
The Situation
Emma has built a $400,000 portfolio of Australian dividend-paying stocks (VAS, CBA, BHP). She receives $16,000/year in franked dividends but wants to reinvest aggressively without selling her core holdings.
Her strategy: Use a margin loan to borrow an additional $100,000, invest it in more dividend stocks. The dividends from the new shares cover most of the interest, and she gets tax deductions on the interest paid.
Emma's Margin Loan Setup
Loan Details:
- • Lender: CommSec Margin Loan
- • Collateral: $400k stocks (70% LTV eligible stocks)
- • Loan: $100,000
- • Interest rate: 8% APR
- • Annual interest: $8,000
Investment Returns:
- • Buys: $100k more VAS
- • Dividend yield: 4.5%
- • Annual dividends: $4,500
- • Franking credits: ~$1,900
- • Total income: $6,400
Tax Benefits:
- • Interest paid: $8,000 → Fully tax-deductible (used for investment)
- • Tax bracket: 32.5%
- • Tax saved: $8,000 × 32.5% = $2,600
- • Plus franking credits: $1,900
- • Total tax benefits: $4,500/year
Net Annual Cost:
Interest paid: $8,000
Less: Dividends received ($4,500) + Tax savings ($4,500) = ($9,000)
Net benefit: +$1,000/year
Emma is effectively getting paid to borrow and leverage her portfolio. Plus, she still owns all $500k in stocks.
The Risks Emma Manages
- 1. Market crash risk: If stocks fall 30%, her LTV could trigger a margin call. Emma monitors weekly and keeps cash reserves to add collateral if needed.
- 2. Interest rate risk: Margin loan rates are variable. If rates rise to 12%, her strategy becomes less profitable.
- 3. Dividend cuts: If companies cut dividends during recession, her income falls. She budgets conservatively.
Emma's approach: Conservative LTV (25%), diversified holdings, and she only borrows what she can afford to lose. This isn't gambling — it's calculated leverage.
The Long-Term Picture
Why borrowing against appreciating assets builds more wealth over time
| Factor | Sell Assets | Borrow Against Assets |
|---|---|---|
| CGT Triggered | ✗ Yes (immediately) | ✓ No (deferred indefinitely) |
| Future Upside | ✗ Lost (sold assets) | ✓ Retained (still own 100%) |
| Ongoing Cost | None (but opportunity cost) | Interest payments |
| Tax Deduction | ✗ None | ✓ Yes (if investment purpose) |
| Refinance Option | ✗ No (assets gone) | ✓ Yes (as assets appreciate) |
| Best When... | Asset expected to fall or stagnate | Asset expected to appreciate >15%/year |
The Wealthy Mindset
The wealthy understand compound growth. Selling assets to access cash feels simple, but it's often the wrong move. By borrowing against appreciating assets, you:
- 1. Defer taxes (potentially forever via estate planning)
- 2. Keep compounding on 100% of your original holdings
- 3. Refinance upward as assets appreciate (access more liquidity tax-free)
- 4. Get tax deductions on interest if used for investments
This is how generational wealth is built — by never selling, always borrowing, and letting assets compound.
Ready to Run the Numbers?
You've seen how three Australians used this strategy successfully. Now it's time to calculate whether borrowing or selling makes sense for your situation.
Try the Borrow vs Sell CalculatorBorrow Strategy - See It: Complete
- Sarah borrowed against Bitcoin and avoided $4,625 in CGT while keeping her BTC for future gains.
- Mark borrowed against gold to expand his business, keeping metal holdings intact while accessing liquidity.
- Tom used a margin loan against stocks to upgrade his property without selling shares in a bull market.
Homework
Which case study resonates most with your situation? Do you have assets that have appreciated significantly but you're hesitant to sell?
Identify your most appreciated asset. Calculate the CGT you'd pay if you sold it today. Now consider: would borrowing at 8-12% interest make more sense if you believe the asset will continue appreciating?
What's Next?
15 minutes