tl;dr
An Australian court ruling classified Bitcoin as similar to local currency rather than a speculative asset, potentially exempting it from capital gains tax (CGT). This decision, stemming from a case involving stolen Bitcoin, could lead to up to AUD 1 billion (USD 640 million) in tax refunds for Aust...
An Australian court has delivered a groundbreaking ruling that classifies Bitcoin as similar to local currency rather than a speculative asset. This legal distinction could exempt Bitcoin from capital gains tax (CGT), potentially resulting in up to AUD 1 billion (approximately USD 640 million) in tax refunds for Australian digital asset holders.
The case stems from a 2019 criminal investigation involving stolen Bitcoin worth around AU$492,000 at the time, which now values over AU$13 million. Judge Michael O’Connell ruled that Bitcoin qualifies as property akin to the Australian dollar, contrasting with the Australian Taxation Office's (ATO) current stance that treats Bitcoin as a CGT asset, similar to foreign currency or shares.
Currently, Australian tax law taxes digital assets as CGT assets if held as investments, with an exemption only if assets are mainly for personal use and cost less than AU$10,000. Most Australians, who hold Bitcoin as speculative investments, have thus remained subject to CGT since 2014.
The ruling could fundamentally alter this framework. If upheld, Bitcoin would be treated like Australian currency for tax purposes, meaning acquisitions and disposals of Bitcoin would have no CGT consequences. Legal experts estimate this could trigger a wave of tax refund claims from the 31-32.5% of Australians who own digital assets.
However, this landmark decision may face appeals or modifications, possibly reclassifying Bitcoin as foreign currency, which remains subject to CGT. The ruling's full impact will depend on further legal developments and regulatory responses.