Australian Court Ruling May Enable $640 Million in Bitcoin Tax Refunds

An Australian court ruled that Bitcoin should be treated as money, not as a taxable asset, possibly paving the way for $640 million in tax refunds. The ruling challenges existing tax frameworks, and if upheld, could exempt Bitcoin transactions from capital gains tax altogether. Concerns remain about the official figures from the ATO regarding potential refunds.

A recent court ruling in Australia may lead to significant changes in the taxation of Bitcoin, potentially allowing for refunds up to $640 million. The case, reported by the Australian Financial Review (AFR) on May 19, revolves around a criminal issue involving federal police officer William Wheatley, who allegedly misappropriated 81.6 Bitcoin back in 2019. Then, the haul was valued around $492,000 but is now worth over $13 million due to market fluctuations.

Judge Michael O’Connell, who presides over the case in Victoria, has deemed Bitcoin as money rather than a taxable asset, essentially treating it similarly to Australian dollars rather than gold or shares. This ruling could set a significant legal precedent, suggesting that Bitcoin transactions might be exempt from the capital gains tax (CGT) presently enforced in Australia.

In an interview with AFR, tax lawyer Adrian Cartland noted that this ruling “totally upends” the current stance of the Australian Taxation Office (ATO). Since 2014, the ATO has categorised cryptocurrency as CGT assets, meaning users must pay taxes upon selling or trading these assets. Any transaction involving Bitcoin – whether for fiat, exchanging it for another cryptocurrency, or spending it on goods – is viewed as a CGT event under existing guidelines.

The long-standing framework defining how cryptocurrency transactions are taxed in Australia is now facing scrutiny. The recent judgment implies that Bitcoin operates more like money, potentially removing it from CGT’s jurisdiction. In other words, if upheld, Bitcoin transactions could avoid capital gains tax altogether.

Cartland further remarked that if Bitcoin is indeed classified as Australian money, then the tax implications disappear. He estimated that if this ruling is maintained on appeal, the possible tax refunds could reach 1 billion Australian dollars, which equates to around $640 million. However, the ATO has not released any official estimates confirming the potential refund figure if Bitcoin’s tax status shifts.