August 7, 2025
5 min read
Cat Woods
Explore Australia’s changing cryptocurrency regulations, tax implications, and a landmark case reshaping crypto asset definitions.
Cryptocurrency and Bitcoin: A Changing Regulatory Environment
By Cat Woods – Aug 07, 2025 10:00 am AEST With the increasing popularity of cryptocurrency and crypto assets internationally, tax lawyers must stay on top of reporting requirements on assets and transactions in a fast-changing digital landscape. Whether you’re a tax lawyer, a crypto advocate, or crypto-curious, understanding the regulatory landscape is essential. A recent Victorian case has raised questions about whether defining cryptocurrency as property rather than money might alter tax obligations for crypto investors and traders. With even the President of the United States having a cryptocurrency in his name (Trump Coin, naturally), it’s perhaps unsurprising that 6.5 million Australians have invested in digital currency. The online trading platform Independent Reserve reports Australians aged over 65 as a growing market for cryptocurrency, increasing from 2% in 2019 to 8.2%. Older Australians are viewing cryptocurrency as an additional investment within their self-managed superannuation, despite warnings from the Australian Securities and Investments Commission (ASIC) that cryptocurrency is a "very high-risk" investment. According to National Seniors Australia, Bitcoin—the most popular and long-established cryptocurrency—has risen in value from approximately $5,000 in 2019 to $170,000 recently, with significant volatility. The very features that attract investors also concern regulators. Entry barriers are low, and many crypto "experts" and "advisors" operate without financial services licenses because cryptocurrency is not defined as legal tender in Australia. Nonetheless, ASIC and the Australian Taxation Office (ATO) have been involved in reviews and reforms to address the growing fintech market. Steven Pettigrove, partner and head of the blockchain group at Piper Alderman, represents financial institutions, fintechs, digital currency exchanges, startups, venture capital, and funds. He told LSJ Online,"Advising clients on crypto assets is challenging without at least a high-level understanding of blockchain technology and related concepts like staking, airdrops, liquidity pools, and hard forks. These transactions can have significant and unintended tax consequences based on the ATO’s current view of the existing law."Pettigrove added,
"Generally speaking, any taxpayer uncertain about how their cryptocurrency activities should be treated for tax purposes should consider seeking professional advice, especially where transactions are substantial, span multiple platforms, or involve more complex activities like staking, airdrops, or DeFi. For those who engage only occasionally in basic crypto investing or trading, legal or tax advice may not be necessary, so long as they understand the relevant tax obligations."
A Regulatory Environment Attempting to Keep Pace
ASIC states that the legal status of crypto assets depends on their structure and associated rights. Depending on circumstances, crypto assets may constitute interests in managed investment schemes, securities, derivatives, or other financial products, all subject to Australian Financial Services Licence (AFSL) regulation. The Australian Law Reform Commission (ALRC) conducted an inquiry to streamline Australia’s financial services regulatory framework to make it more adaptive, efficient, and navigable for consumers and regulated entities. Their focus included definitions in corporations and financial services legislation, regulatory design, and law hierarchy. In January 2024, the ALRC released Confronting Complexity: Reforming Corporations and Financial Services Legislation (ALRC Report 141), containing 58 recommendations for a more cohesive legislative framework. However, key proposals did not specifically address crypto assets as an asset class. For income tax purposes, the ATO views cryptocurrency as an asset held or traded—not as money, shares, or foreign currency. Recent amendments clarify cryptocurrencies are not foreign currencies. Tax obligations for Australian residents depend on the nature of their acquisitions and holdings. For example, if an individual sells or exchanges cryptocurrency as part of a business, it is considered trading stock, with gains assessable and losses deductible, subject to non-commercial loss rules. Individuals disposing of cryptocurrency intending to make a profit as part of a business or commercial transaction may still be assessable. If neither condition applies, profits on sale or disposal are treated as capital gains, provided conditions such as holding the cryptocurrency for at least 12 months before disposal are met. If cryptocurrency is a personal use asset acquired for A$10,000 or less, its disposal and capital losses are disregarded. Personal use assets typically apply when cryptocurrency is acquired and used to buy goods or services and not held long-term. The ATO provides an online calculator and record-keeping tools. Its crypto asset data-matching program compares tax returns with transaction data from designated service providers.ATO Outlines Requirements
Rob Thomson, ATO Assistant Commissioner, explains:"As a general rule, Bitcoin and other cryptocurrencies are capital gains tax (CGT) assets for income tax purposes. Transactions involving crypto assets are subject to the same tax rules as assets generally. The tax treatment depends on how you acquire, hold, and dispose of the asset. If you dispose of your crypto asset, you must report gains or losses in your tax return and keep records of each transaction."He advises tax lawyers:
"At a minimum, crypto investors need to know the time, date, and amount of crypto involved for every transaction, along with expenses such as fees or legal costs. Clients should export their transactions regularly, at least every three months, to avoid losing access to their account, especially before closing an account."Thomson adds that alerts on tax returns often indicate the ATO has received third-party data from crypto exchanges about the taxpayer, emphasizing the importance of accurate reporting. The ATO collects data from Australian crypto exchanges through the crypto assets data-matching program and other sources to identify underreporting.
"Where we determine a taxpayer has failed to take reasonable care in preparing their tax return, resulting in an adjustment, the taxpayer may face administrative penalties based on their behaviour, knowledge of the tax system, and personal circumstances at lodgement," Thomson said.
Victorian Case May Eliminate Tax Liabilities for Crypto
A Victorian criminal case may dramatically change how cryptocurrency is defined for tax purposes. In November 2024, William Noel Wheatley faced Melbourne Magistrates’ Court on charges of stealing 81.616 bitcoin from a cryptocurrency wallet linked to a drug and steroid-trafficking investigation in 2019. Originally valued at $450,000, the bitcoin would exceed $6.3 million today. During the trial, Magistrate Michael O’Connell ruled bitcoin was property akin to Australian dollars. Wheatley’s co-barrister, Adrian Cartland, suggested this could mean bitcoin would not be liable for capital gains tax (CGT), nor would acquisitions and disposals carry tax consequences. Wheatley’s defence argued bitcoin cannot be stolen as it is information, not property, directly challenging the ATO’s 2014 definition of cryptocurrency as property—a stance that Cartland estimates has generated between $500 million and $1 billion in CGT and income tax over the past decade. The judgement included an assertion that cryptocurrency should be treated as property, which Wheatley’s defence is appealing."I find the argument that cryptocurrency has not yet reached a state that is comfortably analogous to a form of money unpersuasive… In my view, that [being a form of money] is sufficient to enable bitcoin to be characterised as property; that is, to use the words of the statute, as ‘other intangible property,’ and I so rule," said Magistrate O’Connell.According to the Australian Accounting Standards Board (AASB) 138 – Intangible Assets, "other intangible assets" are identifiable, non-physical assets lacking physical substance but holding economic value. Pettigrove notes that until the Victorian case reaches the High Court,
"The granting of property rights to crypto owners gives them important protections under property and trust law. A Supreme Court decision in Victoria called Blockchain Tech found Bitcoin has the characteristics of property. This remains superior authority and relies on a long line of common law precedents from other jurisdictions."
Frequently Asked Questions (FAQ)
Tax Implications of Cryptocurrency
Q: How does the ATO view cryptocurrency for tax purposes? A: The Australian Taxation Office (ATO) views cryptocurrency as an asset, not as money, shares, or foreign currency. Q: What are the tax obligations for selling or exchanging cryptocurrency as part of a business? A: If you sell or exchange cryptocurrency as part of a business, it is considered trading stock. Gains are assessable, and losses are deductible, subject to non-commercial loss rules. Q: How are profits from selling cryptocurrency treated if it's not part of a business? A: If neither business nor commercial transaction conditions apply, profits from the sale or disposal of cryptocurrency are treated as capital gains, provided certain holding period conditions are met. Q: What is a "personal use asset" in the context of cryptocurrency, and how does it affect tax? A: If cryptocurrency is acquired as a personal use asset for A$10,000 or less, its disposal and associated capital losses are disregarded. This typically applies when cryptocurrency is used for purchasing goods or services rather than long-term holding. Q: What kind of records does the ATO require for cryptocurrency transactions? A: The ATO requires records including the time, date, and amount of cryptocurrency involved in each transaction, along with associated expenses such as fees or legal costs. It's recommended to export transactions regularly, at least quarterly.Legal Definition of Cryptocurrency and Tax Liabilities
Q: Could a recent Victorian case change how cryptocurrency is taxed? A: Yes, a recent Victorian criminal case has raised questions about whether defining cryptocurrency as property rather than money might alter tax obligations for crypto investors and traders. Q: What was the ruling in the Victorian case regarding Bitcoin's definition? A: In a specific case, Magistrate Michael O’Connell ruled that Bitcoin was property akin to Australian dollars. This ruling is under appeal. Q: What is the defense's argument regarding the tax implications of cryptocurrency following the Victorian ruling? A: The defense argued that if bitcoin is considered property, it might not be liable for Capital Gains Tax (CGT), and its acquisitions and disposals might not have tax consequences, potentially challenging the ATO's stance. Q: How does the ATO's definition of cryptocurrency as property affect tax revenue? A: The ATO's definition of cryptocurrency as property is estimated to have generated significant tax revenue, with one estimate suggesting between $500 million and $1 billion in CGT and income tax over the past decade. Q: What is the legal precedent cited regarding Bitcoin having the characteristics of property? A: A Supreme Court decision in Victoria called Blockchain Tech found that Bitcoin has the characteristics of property, which is considered superior authority and relies on established common law precedents.Originally published at Law Society Journal on Thu, 07 Aug 2025.