- A Victorian magistrate has ruled that Bitcoin is a form of property similar to Australian dollars and therefore transactions using BTC should be exempt from capital gains tax obligations.
- The ruling came during a case in which a former Australian Federal Police Officer stole 81.6 BTC in 2019, today valued at over AUD$13 million.
- If upheld on appeal, this ruling would mean BTC transactions made after 2019 are not subject to CGT, potentially resulting in tax refunds of hundreds of millions of dollars.
A Victorian magistrate has ruled that Bitcoin is comparable to Australian dollars and should therefore be exempt from capital gains tax (CGT). The ruling flies in the face of the Australian Taxation Office’s (ATO) long-term tax treatment of Bitcoin, which has seen holders required to pay CGT on their Bitcoin transactions since 2014.
Magistrate Michael O’Connell made the ruling during a case in which William Wheatley, a former Australian Federal Police (AFP) Officer, stood accused of stealing 81.6 BTC in 2019. At the time, the BTC was valued at AUD$492,000 — today it’s valued at over AUD$13 million.
Magistrate O’Connell ruled that Bitcoin is a form of property — but more akin to Australian dollars than it is to gold or shares. This could mean that, just like transactions using Australian dollars, transactions using Bitcoin should not be subject to CGT.
If upheld on appeal, the ruling potentially means up to AUD$1 billion in CGT refunds to Bitcoin holders who paid CGT on transactions, according to taxation lawyer Adrian Cartland, who acted as co-barrister for the defence in this case.
“The reasoning totally upends the ATO’s view because it was held that bitcoin is Australian
money,” Cartland told the Australian Financial Review.
That is, it is not a CGT asset. Therefore, acquisitions and disposals of bitcoin have no tax consequences.
Adrian Cartland, lawyerRelated: Australian AFP Officer Allegedly Steals Nearly 82 Bitcoins Worth $6m
Ruling Could Have Big Implications For Crypto In Australia
The defence had argued that Bitcoin isn’t property at all, but is instead information and therefore can’t be stolen. This argument sounds a little far-fetched, but in fact there isn’t an established legal basis in Australia for treating Bitcoin as property — despite this lack of clarity, the ATO has followed the convention of treating Bitcoin as property since 2014.
In his ruling Magistrate O’Connell said that although there’s no case law which has established cryptocurrency to be property for the purposes of criminal law, it has nevertheless routinely been treated as property in proceeds-of-crime cases and family law matters.
I find the argument that cryptocurrency has not yet reached a state that is comfortably analogous to a form of money unpersuasive.
Magistrate Michael O’Connell“In my view, that [being a form of money] is sufficient to enable bitcoin to be characterised as property; that is, to use the words of the statute, as ‘other intangible property’, and I so rule.”
Cartland said it could have big implications for how large sections of the digital economy are regulated — even beyond crypto.
“Recognising crypto as property would either make huge parts of the digital economy into property – such as points in Space Invaders or ‘likes’ on Instagram – or would be inconsistent with other laws.”
He added that just because something is valuable doesn’t make it property, using the unlikely example of emotional support: “Love and affection are valuable, and so are services, but they are not property.”
Related: ATO Scrutiny Could Increase for Everyday Investors: Crypto Tax Exec
Wheatley and his legal team have appealed the ruling that Bitcoin is property, but that appeal is unlikely to be heard until the latter part of 2025. If the ruling is upheld it would only apply to Bitcoin specifically, not the entire crypto market, and it would only impact transactions made from 2019.
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