As cryptocurrency becomes more integrated into modern financial portfolios, its role in Australian family law, particularly during property settlements, is becoming increasingly significant. The courts have recognised digital assets such as Bitcoin and Ethereum as property for the purposes of family law, which means they must be disclosed, valued, and divided just like more traditional forms of property. But dealing with cryptocurrency in a legal context brings a host of complexities that require specialised knowledge, vigilance, and, often, forensic investigation.
What Is Cryptocurrency?
Cryptocurrency is a form of digital or virtual currency secured by cryptography. Unlike traditional currencies issued by governments, it is decentralised, not regulated by any central authority, and relies on blockchain technology, a distributed ledger maintained by a network of computers. This technology underpins the integrity and transparency of cryptocurrency transactions, but it can also make these assets difficult to trace or value.
How Are Digital Assets Treated in Australian Family Law?
Under the Family Law Act 1975, parties in a property settlement are legally obligated to provide full and frank disclosure of all assets, including digital ones. This includes:
- Cryptocurrencies like Bitcoin (BTC), Ethereum (ETH), and other altcoins.
- Non-Fungible Tokens (NFTs), which are unique digital assets that may hold significant value.
- Digital Wallet Balances, often containing a mix of crypto assets.
- Online Accounts, which could include shares in digital platforms, digital businesses, or even valuable online gaming items.
Despite their digital nature, courts treat these assets no differently than traditional property such as real estate, vehicles, or shares. They form part of the asset pool to be divided between the parties.
Valuing Cryptocurrency in a Property Settlement
One of the key challenges with digital assets is their volatile nature. Cryptocurrencies can swing dramatically in value, sometimes by more than 20% in a single day, or 80% over the course of a month. This poses a dilemma for accurate valuation during settlement negotiations or court proceedings. Courts have some discretion in how they deal with this volatility. In some cases, they may take into account the value of the assets at different stages, such as at the date of separation, the date of hearing, or the date of sale, depending on the circumstances.
In addition to market volatility, digital assets are notoriously easy to conceal. This makes identifying and valuing them even more complex.
Discovering Hidden Cryptocurrency
Given the private and decentralised nature of cryptocurrency, uncovering undisclosed digital assets often requires a combination of investigative strategies, including:
- Reviewing bank and credit card statements for transactions linked to crypto exchanges
- Examining tax returns for cryptocurrency-related income or capital gains
- Issuing subpoenas to exchanges
- Analysing email records and digital correspondence for references to crypto activity
These methods can help uncover whether a party has used or is holding cryptocurrency in a concealed manner, an issue that courts are increasingly familiar with.
Case Study: Muir & Rodelo (No 2) [2023] FedCFamC1F 845
A leading example of how the courts handle cryptocurrency in property settlements is found in the case of Muir & Rodelo. In this matter, the husband, Mr Rodelo, unilaterally transferred and attempted to conceal a significant amount of cryptocurrency during and after the relationship. The court:
- Found that the husband had engaged in subterfuge by hiding crypto assets
- Ultimately adjusted the property division to 55% in favour of the wife
The court also accepted that although the wife, Ms Muir, had physical possession of a hardware wallet (USB), she had no functional access to the cryptocurrency, which had been managed solely by Mr Rodelo. This distinction was key in determining control and beneficial ownership of the digital assets.
Tax Implications
Another crucial consideration is that cryptocurrency is not classified as legal currency in Australia, but rather as a form of property, subject to Capital Gains Tax (CGT). This means:
- Every time cryptocurrency is sold, traded, or disposed of, a CGT event is triggered
- Parties must calculate any gain or loss for tax purposes
- Legal representatives should advise clients of potential CGT liabilities arising from the settlement or division of digital assets
These tax obligations often continue even after the property settlement is finalised, particularly if assets are held for future sale or investment.
Key Takeaways for Family Law Clients
- Digital assets must be disclosed. Courts require complete transparency regarding all property, including cryptocurrencies and NFTs
- Valuation can be complex. The fluctuating nature of crypto makes expert valuation essential.
- Hidden assets can be uncovered. Even concealed crypto can often be traced through diligent investigation
- Non-disclosure carries serious consequences. Courts can penalise a party who conceals or misuses digital assets
- Tax must be considered. CGT liabilities may arise and should be factored into any property settlement strategy
At Gillard Family Lawyers, we understand the challenges digital assets bring to family law. Whether you’re concerned about the valuation of cryptocurrency, potential non-disclosure, or the tax implications of a settlement, our experienced team can help you navigate these emerging complexities with clarity and confidence.
Contact us today for expert advice tailored to your unique situation.
Written by
Giorgia Wilson
Family Law Solicitor
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