Landmark Court Ruling May Change How Bitcoin (Crypto) is Taxed in Australia

A recent court decision in Victoria could have a major impact on how Bitcoin is treated for crypto tax purposes in Australia. In a landmark case, a Victorian Magistrate ruled that Bitcoin should be see as a form of money, rather than an asset like shares or property. This ruling challenges the Australian Taxation Office’s (ATO) long-standing position and could affect thousands of Australians who have invested in or used Bitcoin.

The Background

The case involved a former Australian Federal Police officer accused of stealing 81.6 Bitcoin (BTC) in 2019. At the time, the Bitcoin was worth around $492,000. Today, its value exceeds $13 million. During the proceedings, the court had to decide how to legally define Bitcoin in the context of the alleged theft.

Magistrate Michael O’Connor found that Bitcoin is to be treated as property, but "akin to the Australian dollar." This means that exchanging Bitcoin is like swapping one currency for another—just like exchanging a $20 note for two $10 notes. In his decision, the Magistrate suggested that no capital gains tax (CGT) should apply when Bitcoin is bought, sold, or exchanged.

Why This Matters

Since 2014, the ATO has treated cryptocurrency as an asset, similar to property or shares. Under this system, selling, gifting, or even using Bitcoin to buy goods or services is considered a "disposal event" and can trigger CGT obligations. For many Australians, this has meant paying tax on profits made from buying and selling Bitcoin.

However, if the Victorian ruling is upheld, it could mean that Bitcoin is considered money, not an asset. This would make Bitcoin transactions tax-free in the same way that exchanging physical Australian dollars is not taxed. In simple terms, if you buy and sell Bitcoin like you would with cash, you might no longer have to pay capital gains tax.

What’s Next?

It is important to understand that this is just one case, and it was decided in a state-level court. The ATO is expected to appeal the decision, and the case could eventually reach the High Court of Australia. Until there is a final ruling from a higher court or a change in legislation, the current tax rules still apply, and the ATO’s view remains that Bitcoin is an asset subject to CGT.

For now, anyone who has paid capital gains tax on Bitcoin transactions since 2019 may want to keep an eye on this case. If the decision is upheld, there could be opportunities for refunds, which some estimates suggest could total up to a billion dollars nationwide.

Final Thoughts

This case is the first of its kind in Australia to directly address how Bitcoin should be treated under the law. While it does not yet change the ATO’s rules, it signals a significant shift that could influence future cases and potentially reshape the tax landscape for cryptocurrency users in Australia.

As always, we recommend staying informed and speaking with a qualified tax professional before making any decisions about your investments. If you have questions about how this ruling might affect you, please feel free to get in touch with our team.