In a significant ruling, a magistrate from Victoria has declared that Bitcoin is essentially a type of property, comparable to Australian dollars, and should therefore be excluded from capital gains tax (CGT) obligations. This decision challenges the long-held stance of the Australian Taxation Office (ATO), which mandated CGT on Bitcoin transactions since 2014.
The ruling was delivered by Magistrate Michael O’Connell in the context of a case involving William Wheatley, a former Australian Federal Police officer accused of stealing 81.6 BTC back in 2019. At that time, the stolen Bitcoin was valued at approximately AUD 492,000; today, its worth has skyrocketed to over AUD 13 million.
Magistrate O’Connell asserted that Bitcoin resembles Australian currency more closely than it does physical assets like gold or shares and therefore, like transactions conducted with AUD, BTC transactions should not be subject to CGT. If this ruling withstands appeal, Bitcoin holders may stand to receive CGT refunds potentially totalling hundreds of millions—some estimates suggest up to AUD 1 billion—on transactions conducted post-2019.
Adrian Cartland, a taxation lawyer involved in the defence, highlighted that this ruling directly contradicts the ATO’s interpretation, claiming, “It was held that Bitcoin is Australian money.” He further noted that Bitcoin should not be regarded as a CGT asset, meaning transactions involving Bitcoin would not incur tax implications.
Interestingly, the defence argued that Bitcoin should not be classified as property at all, proposing instead that it is a form of information that cannot be stolen. While this claim lacks a solid legal precedent in Australia, the ATO has consistently treated Bitcoin as property over the years.
Magistrate O’Connell observed that, even though no established case law categorises cryptocurrency as property in a criminal context, it has been routinely treated as such in cases related to proceeds of crime and family law. He remarked, “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.’”
The implications of this ruling could extend beyond the realm of cryptocurrency, potentially reshaping the regulatory landscape of large sections of the digital economy. Cartland cautioned that recognising cryptocurrency as property may necessitate the classification of other digital assets—such as virtual currency in video games or social media interactions—similarly, which could lead to inconsistencies within existing laws.
Wheatley’s legal team is currently appealing the magistrate’s ruling on the nature of Bitcoin. However, it is anticipated that the appeal process may not proceed until late 2025. Should the ruling stand, it would be specific to Bitcoin transactions and would not encompass the broader cryptocurrency market, applying solely to transactions conducted after 2019.
This landmark decision has the potential to redefine how Bitcoin is viewed by not just investors but also regulatory bodies in Australia, posing significant questions regarding the future taxation and regulation of the burgeoning digital currency landscape.
