Australian Court Decision May Trigger $640M Bitcoin Tax Reimbursements

An Australian judicial ruling could pave the way for approximately $640 million in capital gains tax (CGT) refunds on Bitcoin transactions, following a judge’s determination that cryptocurrency should be classified as currency rather than a taxable asset.

The Australian Financial Review (AFR) reported on 19 May that this significant decision emerged from legal proceedings involving federal police officer William Wheatley, who allegedly misappropriated 81.6 Bitcoin in 2019. The digital tokens were valued at approximately $492,000 when the alleged theft occurred. With Bitcoin’s current market valuation, these same tokens now represent more than $13 million in value.

During the proceedings, Victoria’s Judge Michael O’Connell determined that Bitcoin constitutes a form of money rather than property, drawing parallels between the digital currency and Australian dollars instead of comparing it to shares, gold or foreign currencies.

This interpretation could establish a meaningful legal precedent, potentially placing Bitcoin transactions outside the jurisdiction of Australia’s existing CGT framework.

In conversation with the AFR, tax specialist Adrian Cartland suggested that the verdict “totally upends” the Australian Taxation Office’s (ATO) established position.

Since 2014, the ATO has categorised cryptocurrency assets as subject to CGT. This classification requires users to pay tax when disposing of these assets through sale or exchange. Under ATO guidelines, any disposal of Bitcoin – whether selling it for traditional currency, trading it for another cryptocurrency, or utilising it to purchase goods or services – triggers a CGT event.

This regulatory approach has underpinned the taxation of cryptocurrency transactions in Australia for over ten years. However, the recent judicial decision challenges this established framework by proposing that Bitcoin functions more as currency than property, potentially exempting it from CGT obligations.

Cartland elaborated that the court held that Bitcoin constitutes Australian money. “That is, it is not a CGT asset. Therefore, acquisitions and disposals of Bitcoin have no tax consequences,” the tax lawyer added.

Should the ruling withstand appeal, Cartland estimates potential tax refunds could reach 1 billion Australian dollars ($640 million).

Despite Cartland’s projection of refunds potentially reaching a billion dollars, the ATO has stated there are no official figures confirming the amount that might be refunded if the case alters how Bitcoin is taxed within Australia.