Australian Court Ruling May Exempt Bitcoin From Capital Gains Tax, $640 Million At Stake

A recent court decision in Australia has the potential to significantly impact the taxation of Bitcoin transactions, with estimates suggesting that up to $640 million in capital gains tax (CGT) refunds could be at stake. The ruling, which emerged from a criminal case involving federal police officer William Wheatley, has set a precedent by classifying Bitcoin as a form of money rather than a taxable asset.

On May 19, it was reported that Wheatley allegedly stole 81.6 Bitcoin (BTC) in 2019, valued at approximately $492,000 at the time. With current market prices, these tokens are now worth over $13 million. In the case, Judge Michael O’Connell of Victoria determined that Bitcoin should be treated similarly to Australian dollars, distinguishing it from other assets like shares, gold, or foreign currency.

This interpretation could have far-reaching implications, potentially exempting Bitcoin transactions from Australia’s current CGT regime. Tax lawyer Adrian Cartland noted that the verdict challenges the Australian Taxation Office’s (ATO) long-standing position on crypto assets. Since 2014, the ATO has classified crypto assets as CGT assets, requiring users to pay tax on selling or trading them. This framework has been the basis for taxing cryptocurrency transactions in Australia for over a decade.

The recent ruling, however, suggests that Bitcoin functions more like money than property, potentially exempting it from CGT. Cartland emphasized that if Bitcoin is considered Australian money, it would not be subject to CGT, meaning acquisitions and disposals of Bitcoin would have no tax consequences. If the ruling is upheld on appeal, Cartland estimates that potential tax refunds could total 1 billion Australian dollars ($640 million).

However, the ATO has not provided official figures confirming the amount that could be refunded if the case alters how Bitcoin is taxed in Australia. The ruling has sparked debate and could lead to significant changes in how cryptocurrencies are treated under Australian tax law, potentially benefiting those who have engaged in Bitcoin transactions over the years.