- A Victorian magistrate ruled that Bitcoin is more like money than an asset, meaning it may not be subject to capital gains tax (CGT), a direct challenge to the ATO’s stance since 2014.
- Experts caution that the ATO hasn’t changed its position, and taxpayers shouldn’t expect refunds or alter their tax filings until higher courts confirm the ruling or official guidance changes.
- If upheld on appeal, the decision could trigger AU$1B in tax refunds and potentially position Australia as a global crypto hub by removing CGT obligations on Bitcoin transactions.
Crypto News Australia recently reported how a Victorian magistrate ruled that Bitcoin (BTC) is more like Australian dollars than gold or shares. In other words, this means people might not have to pay capital gains tax (CGT) when they dispose of BTC – for example, by selling it for AUD, swapping it for another crypto, gifting it, etc.
This is where things get interesting, as this directly contradicts the Australian Tax Office’s (ATO) rules. Since 2014, the ATO has considered Bitcoin a CGT asset, meaning you had to pay tax if it went up in value when you sold or otherwise disposed of it.
This ruling challenges that completely. But if higher courts agree with this ruling, thousands of Australians could be eligible for up to AU$1B in tax refunds. It would also potentially change how other crypto is taxed in Australia going forward.
Related: Queensland Man Loses 25 Bitcoin, Waterfront Mansion and Mercedes in AFP Asset Forfeiture
Hold Your Horses
Although, don’t expect a tax refund anytime soon.
Even though the judge ruled that Bitcoin shouldn’t be taxed like a CGT asset, the ATO hasn’t changed its stance. They’ve treated Bitcoin as taxable since 2014 and are unlikely to reverse course overnight and just start refunding everyone.
Dr Lizzie Morton told SmartCompany that taxpayers shouldn’t expect a refund based on the judgment alone, and better turn to the advice of registered tax professionals.
I don’t think the ATO is going to turn around and start refunding. They certainly have a fairly sound position that they’ve held quite strongly since their determinations came out in 2014 (…) The ATO’s position and still the ATO’s position until it’s not. So we’ve got to be really careful.
Dr Lizzie Morton, Senior Lecturer at Curtin Law School
In other words, Morton is advising to not change your tax reporting until the ATO updates its guidance or a higher court confirms the new interpretation.
The current ruling isn’t final; it’s expected to be reviewed by the Court of Appeal, and quite possibly even the Federal or High Court later this year, according to Geoff Rooney, a partner in BDO’s Financial Services Audit & Assurance in Sydney.
Related: Moody’s Downgrades US, Crypto Reacts Mostly Positive as BTC Reaches $106k
But if upheld, it could be a game-changer, says Byron Goldberg, venture capitalist at Backbone Partners, stating that O’Connell’s findings could position Australia as a leader in crypto. No more capital gains tax on BTC, meaning a potential influx of investors, developers, and businesses to the country.
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