A recently decided court in Australia if Bitcoin could open the door to as much as USD 640 million in capital gains tax (CGT) repayment and revolutionize how digital assets are taxed in the country, after a judge decided that Bitcoin should be treated as local money.
The case in question was the criminal case involving federal police William Wheatley, allegedly stole 81.6 BTC 2019 during a drug investigation. At the time of the alleged crime, the assets were worth approximately USD 492,000 (317,266 US $), at current market prices, the value would be more than US 13 million (US $ 8.3 million).
However, the value of the assets in question did not make the decision significant.
As reported On May 19 by Local Outlet Australian Financial Review (AFR), Judge Michael O’Connell decided from Victoria it Bitcoin qualifies as property of similar nature to the Australian dollar, rather than a speculative asset, such as a foreign currency, shares or gold – which is how Australian tax office (ATO) is currently dealing with it for tax purposes.
This new interpretation of bitcoin – and by extension many other digital assets – such as resembling the local currency can put a significant legal precedent in Australiapotentially place them outside the framework of the country’s current regime for CGT – a tax on profits when you sell or “discard” or use an asset that is increased in value.
In turn this would probably lead to a huge stream of tax refund Applications from the approximately 31-32.5% of the Australians who own or have owned digital asset- 2025 Independent Reserve Cryptocurrency Index (IRCI).
Australia’s currency digital asset tax rules
Currently, in Australia, a person will use or transfer with digital assets to determine how they are treated for tax purposes.
As declared By the ATO: “The Most Common use of Crypto Assets is as an investment (Investors Acquire and Hold Crypto Assets to make a Financial Profit from Holding or disposing of them). As a General Rule, for Investors: Crypto Assets Are Taxed as Cgåsl Investing in Crypto Assets Rewards for Staking Crypto Are Ordinary Income for Tax Purposes. ”
However, there is an exception, which is when digital assets are not mainly held for investments but for “personal use”, subject to capital gains on a personal use is also subject to CGT if it costs more than US $ 10,000 (US $ 6,418) to acquire the asset.
According to ATO, “a crypto supply (such as BTC, a Cryptocurrency) is an access to personal use if you retain or use it primarily for personal use, for example to buy objects for personal use or consumption.”
This is often determined by the time of “disposal”. Based on the current rules, a digital asset acquired and is used in a short period of time will be used to buy articles for personal use or consumption is likely to be regarded as an access to personal use. On the other hand, a digital asset that has been acquired and is held for some time before it is used, or if only a small part of it is used, is to buy the subject of personal use or consumption, is less likely to be considered as an access to personal use.
Therefore because of How the vast majority of people interact with digital currenciesEspecially BTC and high risk with high reward speculative investments, to buy and give in hopes that the price will increase, rather than as a currency to spend for “personal use”-many Australian holders and trader of digital assets have been the subject of CGT.
This is the current taxation approachLike ATO has been stuck since 2014. In other words, at any time digital assets are sold, replaced or used to buy goods and services, the holders who handle the digital assets are expected to calculate and pay CGT.
Judge O’Connell’s decisive potentially shakes up things by classifying Bitcoin as more similar to Australian money, and while Foreign Currency is subject to CGTAustralian currency is not.
The consequences of the decision
In an interview with AFR, tax lawyer Adrian Cartland said that the verdict “completely arises” ATO’s current position.
Cartland’s interpretation of the decision was that it mainly makes Bitcoin corresponding to Australian money, for tax purposes: “That is, it is not a CGT supply. Therefore, acquisitions and divestments of Bitcoin have no tax consequences.”
If the decision is maintained on appeal, Cartland estimated that potential tax contributions may amount to $ 1 billion ($ 640 million).
However, it is possible that the decision could be reversed in appeal, or-overweight the potential far-reaching consequences of the decision-it can be changed to compare Bitcoin to foreign currency, rather than Australian money, which would put it back in the area of the current CGT regime.
Watch: Reggie Middleton at Defi, Booms/Busts & Crypto Regulation
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