Tax Considerations for Bitcoin Estates in Australia

For Australian tax purposes, Bitcoin is a capital gains tax asset. Buying is not a taxable event. Selling, swapping one crypto for another, or spending it on goods and services all are. Every disposal has a cost base and a capital proceeds figure, and the difference is a gain or a loss.

This matters at death because the executor must be able to establish the cost base of holdings that may have been acquired a decade earlier across multiple exchanges.

When a person dies, the transfer of an asset to their legal personal representative or to a beneficiary is generally not treated as a disposal for CGT purposes. The tax point is deferred - it rolls over.

For an asset acquired by the deceased after 20 September 1985, the beneficiary generally inherits the deceased's original cost base. The common belief that everything resets to market value at death applies to pre-CGT assets, not to Bitcoin, which cannot be pre-CGT.

If the executor sells Bitcoin to distribute cash, the estate has made a disposal and the estate pays CGT on the gain. If the executor transfers the Bitcoin itself to the beneficiary, the rollover generally applies and no CGT arises at that point - the beneficiary takes on the inherited cost base and pays when they eventually sell.

In-specie transfer is often the better outcome, particularly where beneficiaries are on lower marginal rates or intend to hold. But it requires the beneficiary to be able to receive and secure the Bitcoin, which is a custody question as much as a tax one.

The 50% CGT discount for assets held longer than twelve months generally survives into the estate, with the deceased's acquisition date counting toward the holding period. That can be worth a great deal on long-held coins, and it is easy to accidentally destroy by disposing at the wrong time or in the wrong entity.

You need acquisition dates, acquisition amounts in AUD, exchange records, wallet addresses, and the market value at the date of death. Where records are incomplete, the ATO expects a reasonable, documented methodology rather than a guess.

Practically, this is the single strongest argument for maintaining a live digital-asset register during life. Reconstructing ten years of exchange history after a death is expensive, slow, and sometimes impossible.