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
Three worked examples of borrowing against an asset, with the same numbers shown for selling.
Your Learning Journey
Your Learning Journey
This Step Takes: 20 minutes
Three worked examples, each showing the numbers for selling and for borrowing.
What You'll Learn
The numbers for each path: CGT, interest, loan balance and net position, in a rising and a falling market.
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)
- • Unrealised gain: $50,000
Sarah's Goal:
- • Needs: $75,000 for house deposit
- • Timeline: Within 30 days
- • Tax bracket: 37% (income $135,001 to $190,000, FY2026-27)
- • Conviction: Believes BTC will reach $100k+ long-term
The author has invested in various asset classes. Nothing on this page is a recommendation.
Path A: sell 2.5 BTC at $30,000 for $75,000. Path B: borrow $75,000 against all 5 BTC (50% LTV) at 10% p.a., interest-only. Interest on a loan used for a house deposit is not deductible. Selling is a CGT event; pledging collateral is not, but a lender liquidation is a disposal and triggers CGT.
Scenario 1: BTC at $100,000 in year 5
LTV 15.0%.
| Row | Path A: sell | Path B: borrow |
|---|---|---|
| BTC held | 2.5 | 5 |
| Cash in hand at the start | $70,375 | $75,000 |
| CGT paid | $4,625 | $0 (deferred, not removed) |
| Loan still owed | $0 | $75,000 |
| Interest paid (5 years) | $0 | $37,500 |
| Asset value at $100,000/BTC | $250,000 | $500,000 |
| Net position | $245,375 | $387,500 |
Net position = asset value − loan still owed − interest paid − CGT paid (same formula in both columns). Difference, Path B minus Path A: +$142,125.
Scenario 2: BTC falls 30% to $21,000 in year 2
LTV 71.4%: above a typical 70% threshold, so the lender sells 3.57 BTC to repay the loan. That sale is a CGT event.
| Row | Path A: sell | Path B: borrow |
|---|---|---|
| BTC held | 2.5 | 1.43 |
| Cash in hand at the start | $70,375 | $75,000 |
| CGT paid | $4,625 | $661 (liquidation) |
| Loan still owed | $0 | $0 |
| Interest paid (2 years) | $0 | $15,000 |
| Asset value at $21,000/BTC | $52,500 | $30,000 |
| Net position | $47,875 | $14,339 |
Net position = asset value − loan still owed − interest paid − CGT paid (same formula in both columns). Difference, Path B minus Path A: −$33,536.
Illustrative inputs. CGT: gain × 50% discount (held over 12 months) × 37% marginal rate (FY2026-27 bracket $135,001 to $190,000; Medicare levy not included). Interest is simple, interest-only. In Path A the cash row is already after CGT and the net row subtracts the CGT again, so the rows are not additive: both net positions are measured as if the full $75,000 were received.
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: an allocated vault
- • Purchase price: $2,000/oz AUD
- • Cost basis: $200,000
- • Current value: $300,000 ($3,000/oz)
- • Unrealised 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
Path A: 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
Holds 66.7 oz after the sale; $7,515 CGT paid in the year of sale
Path B: borrow
Loan Structure:
- • Lender: a bullion lender
- • Collateral: 100 oz gold
- • Loan: $100k (33% LTV)
- • Interest: 7% APR
- • Annual cost: $7,000
Receives $100,000; owes $100,000 plus interest
Interest is deductible because the money is used in the business: $7,000 × 45% = $3,150 a year, so $3,850 a year after tax.
Mark's Numbers, Both Directions
What changes between the two paths:
- 1. Yearly cost: Path A has none after the sale. Path B costs $3,850 a year after the business deduction.
- 2. Gold held: Path A leaves 66.7 oz exposed to the gold price; Path B leaves 100 oz exposed, with a $100,000 loan against them.
- 3. LTV: at 33% LTV and a 70% threshold, the threshold is reached if gold falls about 52%, to about $1,429/oz (1 − 33% ÷ 70%).
If gold rises to $4,000/oz, the 100 oz are worth $400,000 against the $100,000 loan (LTV 25%), and the CGT stays deferred, not removed. If gold falls to $1,400/oz, the 100 oz are worth $140,000 (LTV about 71%), and the lender can sell gold to repay the loan, which is a CGT event.
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 and wants to invest more without selling her existing holdings.
Her plan: Use a margin loan to borrow an additional $100,000 and buy more dividend-paying shares. The dividends from the new shares ($4,500) cover part of the interest ($8,000). The interest is deductible because the money buys income-producing shares.
Emma's Margin Loan Setup
Loan Details:
- • Lender: a margin lender
- • 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 on the Extra Income and the Interest:
- • Tax bracket: 30% (FY2026-27, income $45,001 to $135,000)
- • Taxable dividend: $4,500 cash + $1,900 franking credit = $6,400
- • Tax on it: $6,400 × 30% = $1,920, less the $1,900 franking credit = $20 to pay
- • Interest deduction: $8,000 × 30% = $2,400 less tax
Net Annual Result:
Dividends received: +$4,500
Net tax on the dividend: −$20
Tax saved by the interest deduction: +$2,400
Interest paid: −$8,000
Net: $4,500 − $20 + $2,400 − $8,000 = −$1,120/year
Before any change in the share price. She owns $500k of shares and owes $100k. At these inputs the extra $100k of shares would need to rise by about $1,120 a year (1.1%) for the yearly result to reach zero, before tax on that gain.
The Risks in Emma's Setup
- 1. Market fall: a 30% fall on the $400k of collateral takes the LTV from 25% to about 36% ($100k ÷ $280k). At a 70% threshold, a margin call comes at a fall of about 64% (1 − 25% ÷ 70%).
- 2. Interest rate: margin loan rates are variable. At 12% the interest is $12,000, the deduction $3,600, and the net annual result about −$3,920.
- 3. Dividend cuts: if companies cut dividends, the $4,500 and the $1,900 franking credit fall, and the interest stays the same.
Emma's settings: LTV 25% ($100k loan against $400k of shares), holdings spread across several companies.
What Each Path Involves
The same questions for both paths. The try-it calculator computes the result with your own numbers.
| Question | Path A: sell | Path B: borrow |
|---|---|---|
| CGT at the time | CGT event on the units sold | No CGT event when the loan is drawn |
| Later CGT | None on the units sold | CGT if the asset is sold later, or if the lender sells collateral |
| Units exposed to the price | Only the units still held | All units, with the loan owed in full either way |
| Yearly cost | None after the sale | Interest, deductible only if the money earns assessable income |
| Liquidation | Not applicable | The lender can sell collateral once the LTV passes its threshold |
| Outcome depends on | Asset price, your tax rate | Asset price, your tax rate, interest rate, loan term, LTV threshold |
Borrow Strategy - See It: Complete
- Sarah: selling 2.5 BTC costs $4,625 CGT now. Borrowing defers it and adds interest; in the falling scenario the lender's sale triggers CGT.
- Mark: selling 33.3 oz costs $7,515 CGT. Borrowing $100k at 7% costs $3,850 a year after the business deduction and keeps 100 oz exposed to the gold price.
- Emma: borrowing $100k at 8% to buy shares yielding 4.5% gives a net result of about −$1,120 a year after tax, before price changes.
Homework
Which case study is closest to your situation? Which of its inputs differ from yours?
Pick one asset. Calculate the CGT you would pay if you sold part of it today, and the interest you would pay to borrow the same amount for the same period.
What's Next?
15 minutes