In a ruling that could fundamentally reshape how Australia treats digital assets, Judge Michael O’Connell of Victoria has determined that Bitcoin should be regarded as a form of money rather than a taxable asset. This decision came as part of a criminal trial involving former Australian Federal Police officer William Wheatley, who allegedly misappropriated 81.6 Bitcoin while executing a search warrant in 2019.
Case Background
Wheatley was accused of stealing the Bitcoin, then valued at approximately AUD 492,000. That stash is now worth over AUD 13 million. As the court reviewed whether theft of the cryptocurrency constituted theft of “property,” Judge O’Connell made a significant determination: Bitcoin, in this context, was likened to Australian dollars and treated as a form of money.
The Legal and Tax Implications
Traditionally, the Australian Taxation Office (ATO) has classified Bitcoin and other cryptocurrencies as assets, subjecting them to capital gains tax (CGT). This means any disposal, sale, or exchange of Bitcoin would trigger a CGT event, requiring reporting and possible tax liabilities.
However, Judge O’Connell’s view disrupts this. By comparing Bitcoin to currency rather than property or a CGT asset, the door is opened to reinterpret how crypto transactions are taxed. If this legal interpretation is adopted more broadly, Bitcoin transactions could be treated the same as cash, removing the CGT implications entirely.
Expert Commentary and Taxpayer Reactions
Adrian Cartland, a prominent tax lawyer and co-barrister in the case, called the ruling a “massive upheaval” to the ATO’s existing framework. He explained that if Bitcoin is reclassified as money, acquisitions and disposals of it would no longer be taxable under capital gains rules.
Cartland even suggested that, depending on the eventual outcome of appeals and further cases, this could lead to tax refunds in the range of AUD 1 billion. However, the ATO has not confirmed or endorsed these figures and maintains its position until higher courts potentially weigh in.
ATO’s Current Position and What’s Next
For now, the ATO still treats Bitcoin as a CGT asset and has not adjusted its guidance or tax rulings in response to this single case. Importantly, this judgment doesn’t immediately override national tax law or ATO practice. It would need to be affirmed by higher courts or prompt a legislative change to create a definitive shift in how cryptocurrencies are taxed across Australia.
The defense has indicated they plan to appeal the decision on broader grounds, potentially putting the very definition of Bitcoin as property or money under further judicial scrutiny.
Implications for Australian Crypto Investors
For investors and businesses transacting in Bitcoin, this ruling highlights a critical turning point. If subsequent courts uphold the view that Bitcoin is money, this could relieve users of significant tax burdens. It could also necessitate large-scale revisions of previous tax filings, a rethinking of crypto investment strategies, and a complete overhaul of ATO policy.
However, until any change is codified into law or confirmed by a higher court, all taxpayers should continue to comply with existing ATO guidance.
The AT.Visory team will continue monitoring this evolving legal development. For tailored advice on how this may impact your crypto investments or tax position, feel free to reach out.
