A Victorian Magistrates’ Court decision has potentially cast doubt on the Australian Taxation Office’s long-standing approach to taxing cryptocurrency. The case arose from criminal proceedings against former AFP officer William Wheatley, who allegedly stole 81.6 bitcoin in 2019, then worth around $492,000.
Wheatley’s defence argued bitcoin is “information” and therefore not capable of being stolen. Magistrate Michael O’Connell rejected that argument, holding bitcoin is property. Importantly, he went further, finding bitcoin is more akin to Australian dollars than to shares, gold, or foreign currency. In practical terms, the ruling suggests that exchanging or transacting in bitcoin may be comparable to swapping a $20 note for two $10 notes – an action which does not trigger capital gains tax.
If upheld on appeal, this interlocutory ruling could have major implications as taxpayers who have paid Capital Gains TAx (CGT) on bitcoin disposals may collectively be eligible for refunds worth hundreds of millions, potentially up to $1 billion.
For now, the ATO’s published guidance remains unchanged: cryptocurrency is treated as a CGT asset. However, the decision signals a growing judicial willingness to reconsider bitcoin’s legal character, with significant potential consequences for investors, businesses, and the broader tax landscape.
Key Takeaways for Clients
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Status Quo Remains – The ATO still treats cryptocurrency as a CGT asset. Taxpayers must continue to report disposals accordingly until higher courts or legislation provide clarity.
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Potential Refund Opportunity – If this decision is upheld on appeal, taxpayers who have previously paid CGT on bitcoin transactions may want to consider whether they may be eligible for refunds.
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Appeals Expected – As this is a Magistrates’ Court ruling in a criminal matter, further judicial consideration is likely. Its application to tax law is not yet settled.
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Risk Management – Investors should maintain detailed records of their crypto transactions and continue to comply with existing ATO requirements. Non-compliance may still trigger penalties.
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Strategic Planning – Clients with significant historic or ongoing cryptocurrency holdings should monitor developments closely and seek advice on structuring transactions, potential amendment claims, and opportunities to preserve their position should the law change.
