How To Get Around the CGT Changes on ETFs? Its Hard, But This Could Be The Best Idea

It has been nearly a week that we’ve had time to digest the CGT Changes on ETFs. Yes, you read correct: after months of thought that any CGT changes could be only on real estate, it is being extended to all asset classes.

There has been a lot of hysteria about the changes. We don’t use the term hysteria because there is no right to be concerned over them, but we use it because we just don’t know where everyone was when everything else that led to Australia to become a banana republic was being implemented. It was all OK if you could just plough it into investment properties, right? Right? But if you couldn’t, the way into it was through shares and ETFs, but even this loophole is closing.

Again, Australia was far from perfect even a week ago. It has a market that is heavily weighted towards banks and resources, a regulatory posture that is increasingly hostile to AI-driven innovation, and a 2026 Federal Budget that materially worsens the after-tax case for long-term investing outside superannuation.

That said, there could be a way for investors to minimise the impact. Namely, US technology-focused ETFs listed on the ASX. There is quite a performance gap between these vehicles and broad Australian market ETFs and it is not by accident. Australian investors will still face higher tax bills then they did a week ago, but at least they’ll be giving themselves the best chance of a return, in our view.

The Problem With Being Too Australian

Australia’s benchmark index, the S&P/ASX 200, is a peculiar beast by global standards. Financial services and materials, two of the most cyclical and interest-rate-sensitive sectors in existence, account for roughly 45% of the index by weight. Technology, the sector that has driven the majority of global wealth creation over the past decade, accounts for approximately 3–4%. Compare that with the S&P 500, where information technology and communication services together represent close to 40% of index weight, and the structural mismatch becomes obvious.

The consequence of that composition shows up in long-run returns. The Vanguard Australian Shares Index ETF (VAS), tracking the ASX 300, has historically returned approximately 9% per annum since inception in 2009. That is a respectable outcome in isolation. Set it against NDQ’s average annual return of more than 20% since its 2015 launch, however, and the gap is difficult to rationalise away as cyclical noise. Over a decade, that difference is not merely statistical. It is the difference between doubling capital and increasing it by a factor of six.

This is not an argument against owning Australian equities entirely. Franking credits, dividend income and currency alignment all provide genuine value to Australian residents holding domestic shares. However, the case for concentrating the majority of a growth-oriented portfolio in the ASX, at the expense of US technology exposure, has become harder to sustain.

Three Structural Arguments for US Tech Exposure

1. Australia lacks the companies

The world’s leading technology businesses, those driving artificial intelligence infrastructure, cloud computing, semiconductor development and consumer platform growth, are listed in the United States. Apple, Nvidia, Microsoft, Alphabet, Meta and Broadcom do not have ASX equivalents. Australia’s domestic technology sector, while growing, remains oriented towards software-as-a-service businesses such as Xero (ASX:XRO), TechnologyOne (ASX:TNE) and Pro Medicus (ASX:PME).

These are high-quality businesses, don’t get us wrong about that. But they are not, however, operating at the scale or in the segments where AI capital expenditure is concentrating globally. NDQ provides exposure to 100 of the largest non-financial companies on the NASDAQ, with approximately 41% in electronic technology and a further 39% in technology services. FANG, tracking the NYSE FANG+ Index, equally weights ten of the most strategically significant technology and AI-adjacent companies in the world. Neither basket is replicable through ASX-listed securities.

Of course, if Anthropic and/or Open AI list later in the year, as it appears both will, US Tech ETFs will be exposed to them – make no mistake.

2. Australia’s regulatory posture is increasingly unfavourable to AI.

Australia has not distinguished itself as a jurisdiction that moves quickly to facilitate AI commercialisation. The regulatory instinct, consistent with broader trends in labour market and industrial policy, leans towards caution, consultation and constraint. That posture may be defensible on social grounds.

Commercially, it is likely to delay adoption, reduce investment and compound the talent disadvantage Australia already faces relative to the United States. Investors who believe AI will drive the next decade of earnings growth have limited tools to express that view through the domestic market. US-focused ETFs listed on the ASX are the most accessible of those tools.

3. The performance differential has been durable, not episodic.

There is a temptation to dismiss the outperformance of US technology ETFs as a product of a specific rate environment or a single cycle driven by post-pandemic liquidity. The data does not support that interpretation. NDQ has compounded at more than 20% annually since 2015, a period that includes two significant drawdowns, a global pandemic, a rapid rate-tightening cycle and a geopolitical environment that generated meaningful uncertainty.

The Hyperion Global Growth Companies ETF (HYGG), a related vehicle, has returned an average annualised 19.7% over a decade. These are not outliers. They are consistent with the underlying earnings power of the businesses held within these funds.

Addressing CGT Changes On ETFs

Now of course, the 2026 Federal Budget’s proposed changes to capital gains tax do not discriminate between domestic and international ETFs. Whether an investor sells units in VAS or NDQ, the same rules apply. The 50% CGT discount for individuals is to be replaced, from 1 July 2027, with a cost-base indexation model and a new 30% minimum tax on capital gains accruing after that date.

The Financial Services Council’s modelling indicates that under the new framework, Australia would move from the sixth-lowest effective CGT rate in the OECD to the 24th-lowest. At the upper end of outcomes, effective CGT rates could approach 47%, depending on investment performance and prevailing inflation. That is a meaningful deterioration in the after-tax investment case for retail investors holding growth assets outside superannuation.

The relevance to this discussion is indirect but important. When after-tax returns are compressed across all asset classes, the gross return differential becomes more consequential, not less. An investor in the 47% effective CGT scenario who has held an asset returning 20% annually over a decade retains materially more real wealth than one who held an asset returning 9% annually, even if both face the same tax treatment at exit. The new rules do not change the argument for US technology exposure, but they do sharpen it.

Risks That Cannot Be Dismissed

Intellectual honesty requires acknowledging that this thesis carries genuine risks. Currency is the most immediate. US technology ETFs on the ASX provide unhedged USD exposure by default. A sustained appreciation of the Australian dollar would erode returns in local terms, and history suggests that AUD/USD movements can be significant over medium-term horizons. Hedged alternatives such as HNDQ exist, though they carry an additional cost and introduce their own basis risk.

Concentration is a second concern. FANG, in particular, is not a diversified vehicle. It holds approximately ten equally-weighted positions. A disappointing earnings result from one or two constituents can produce material drawdowns, as Nvidia’s approximately 17% single-day decline in January 2025 illustrated. NDQ’s 100-stock structure provides considerably more dispersion, though it remains heavily weighted towards the largest NASDAQ constituents.

Valuation is the third and perhaps most structurally significant risk. US mega-cap technology businesses are not cheap by historical standards. The argument that structural earnings growth justifies elevated multiples is plausible, though it is not guaranteed. Investors entering these vehicles at current prices are implicitly accepting that the next decade will resemble the last. That is a reasonable base case. It is not a certainty.

Conclusion

The case for US technology-focused ASX ETFs as a core allocation within a growth-oriented Australian portfolio rests on three durable foundations: structural exposure to the world’s most important businesses, access to the segment most likely to benefit from AI-driven earnings growth, and a long-run performance record that is difficult to attribute to cycle or coincidence.

The 2026 CGT changes, whilst applying equally to all ETF vehicles, make the gross return differential more consequential at the margin. By ‘get around’, we don’t mean you’ll pay lower tax than local ETFs, but you’ll give yourself a better chance of a return until/unless things change in Australia.

None of this eliminates the risks of currency exposure, concentration or valuation. It does, however, suggest that a portfolio anchored entirely in Australian equities carries its own underappreciated risk: the risk of missing the dominant economic story of the current era entirely.

This article is general information only and does not constitute financial advice. Investors should consider their personal circumstances and consult a licensed financial adviser before making investment decisions.