A court decision in Australia could open the door to as much as $640 million in capital gains tax (CGT) refunds on Bitcoin transactions

A court decision in Australia could open the door to as much as $640 million in capital gains tax (CGT) refunds on Bitcoin transactions after a judge ruled that crypto should be treated as money rather than a taxable asset.

A recent court decision in Australia could have significant implications for capital gains tax (CGT) on Bitcoin transactions, with one tax lawyer estimating that the ruling could lead to refunds of up to 1 billion Australian dollars ($640 million).

The Australian Financial Review (AFR) reported on May 19 that Judge Michael O’Connell of Victoria ruled that Bitcoin is a form of money rather than property. The interpretation could place Bitcoin transactions outside the scope of Australia’s current CGT regime.

The case, which involved federal police officer William Wheatley allegedly stealing 81.6 Bitcoin (BTC) in 2019, could have far-reaching consequences for cryptocurrency taxation in the country.

The judge’s verdict in the case, which is still pending an appeal, directly contradicts the Australian Taxation Office’s (ATO) stance on crypto taxation.

Since 2014, the ATO has maintained that cryptocurrency assets are CGT assets. This implies that individuals are liable for paying tax when selling or trading such assets.

According to the ATO’s guidelines, any disposal of Bitcoin, including selling it for fiat, exchanging it for another crypto or using it to purchase goods or services, constitutes a CGT event.

This framework, which classifies cryptocurrency as a taxable asset, has been the basis for taxing cryptocurrency transactions in Australia. However, the recent ruling challenges this approach by suggesting that Bitcoin functions more like money than property, potentially exempting it from CGT.

The interpretation could also have implications for the taxation of other cryptocurrencies in Australia.

The judge’s ruling comes amid increasing scrutiny of cryptocurrency taxation policies globally. In the United States, the Internal Revenue Code already classifies cryptocurrency more like property than money.

This classification has led to complications in taxing cryptocurrency transactions, with the Center for Law and Economic Studies at the University of Illinois stating in 2023 that the current U.S. tax system is “ill-equipped” to handle cryptocurrency.

The Australian case could serve as a precedent for other countries considering how best to integrate cryptocurrencies into their existing legal and tax frameworks.