Bitcoin Could Become Australian Currency, Eliminating Capital Gains Tax

Australia, known for its crypto-friendly environment, is on the brink of a significant shift in how Bitcoin is taxed, following a recent legal development. In May 2025, a ruling by Victorian Magistrate Michael O’Connell in a Bitcoin theft case suggested that Bitcoin could be recognized as Australian currency, not property. This landmark statement has sparked intense debate across the crypto community and tax authorities.

Adrian Carter, a co-defendant in the case, stated that "It was held that Bitcoin is Australian money. That is, it is not a CGT asset. Therefore, acquisitions and disposals of Bitcoin have no tax consequences." If Bitcoin is officially reclassified as currency, this could eliminate capital gains tax (CGT) on BTC transactions and result in the government owing nearly AUS$1 billion (approx. US$640 million) in past tax collections.

However, the ruling is under appeal and has not been officially regulated. While the decision received attention, the Australian Tax Office (ATO) has not updated its guidance. Until higher courts confirm Bitcoin as legal tender, the existing tax framework remains in place. Currently, cryptocurrencies including BTC, ETH, NFTs, stablecoins, and DeFi are classified as CGT assets, subject to Capital Gains Tax between 0% and 40%, based on individual income brackets. A 50% CGT discount applies if assets are held for over 12 months before being sold. The ATO tracks all crypto activity, and non-compliance can lead to legal penalties.

Despite rumors, there are no loopholes in the current regime. Even if investors hope for CGT exemptions, the law remains unchanged until Bitcoin is officially recognized as currency by a higher court and accepted by the ATO. Unless Bitcoin is formally reclassified, Australian investors and businesses must follow the existing crypto tax rules. The ATO continues to treat digital assets as property, not money, and capital gains tax still applies to all crypto-related transactions.

The ATO has intensified its focus on digital assets, implementing robust data-matching protocols to ensure compliance. The agency collaborates with cryptocurrency exchanges to collect customer information, including transaction data and personal identifiers. This initiative aims to identify discrepancies in reported income and enhance accurate tax reporting. Taxpayers who receive warning letters from the ATO are advised to review their cryptocurrency transactions and amend any inaccuracies promptly.

For crypto holders, investors, and builders, staying informed and maintaining clear records is paramount. The legal landscape is evolving rapidly, and the outcome of the appeal could set a transformative precedent for future crypto taxation in Australia. Policymakers, regulators, and legal experts are closely monitoring the case, recognizing that its final verdict could reshape how crypto is treated, not just legally, but economically. As Australia navigates this complex and evolving environment, the potential for significant changes in crypto taxation looms on the horizon, offering both challenges and opportunities for the digital asset community.