Highlights

  • The Tax Institute's 16 October submission urges the ATO to hold two draft crypto rulings until the High Court rules.
  • Poulton v Conrad asks whether a bitcoin holding is property at common law, and judgment has been reserved.
  • Draft TD 2026/D2 concludes that wrapping ETH through a smart contract triggers a CGT event for the ETH.
  • Draft TR 2026/D1 says airdrop recipients outside a crypto business are not taxed on receipt; market value sets cost base.

Is a bitcoin holding legally "property"? It sounds like a question for philosophers, yet the High Court is deciding it now, and The Tax Institute says the answer could matter for every Australian crypto investor. In a submission lodged on 16 October 2026, the professional body asked the ATO not to finalise two draft crypto rulings until the court speaks. With 2025-26 returns due from self-lodgers by 2 November, the debate reaches the heart of how crypto gains are taxed.

The High Court case at the centre

The case is Poulton v Conrad (H1/2026), filed in the court's Hobart registry. It asks whether a bitcoin holding is "property" at common law, and the dispute arose from $10,000 paid to invest in bitcoin. The court has reserved judgment, and as at 16 October 2026 no decision had been handed down.

Why the Commissioner stepped in

The Commissioner of Taxation sought leave on 7 May 2026 to intervene on Ground 1 only. He argues that a bitcoin holding, described as a ledger entry tied to an address, is property, preferring to treat it as a "chose in possession" and relying in part on the Corporations Amendment (Digital Assets Framework) Act 2026.

He also warned of the stakes. A finding that bitcoin is "not property" could undermine CGT treatment under TD 2014/26 and trading-stock treatment under TD 2014/27, and could force reassessment of past arrangements.

Neither outcome is certain, and the court could decide on narrower grounds.

The two draft rulings

The ATO released both on 19 August 2026. They are draft guidance, not final rulings and not law.

TD 2026/D2 deals with "wrapping" and "unwrapping" crypto through smart contracts. Using ETH and wrapped ETH (WETH), it concludes that wrapping ETH triggers a CGT event for the ETH, meaning taxpayers will realise more gains and losses.

TR 2026/D1 deals with airdrops. People not carrying on a crypto business, and who did not receive the airdrop as a reward for services, are "not taxed on the value of the cryptoassets received". Market value at receipt becomes the first element of the cost base.

What The Tax Institute wants

Its submission urges the ATO to hold both drafts until the High Court decides Poulton v Conrad, arguing they take positions on the nature of crypto assets that do not match the Commissioner's own arguments in the case. It also notes both were released six days after the Poulton hearing and would apply retrospectively, which can affect transactions already entered into and sometimes already reported.

Two worked examples

Hypothetical example 1: an investor bought 2 ETH in 2023 for $6,000 and wraps them in 2026 when they are worth $10,000. If TD 2026/D2 applied, the capital gain is $4,000. Held more than 12 months and with the event before 1 July 2027, the 50% discount leaves a $2,000 net gain. At 30% plus the 2% Medicare levy, the tax is $640, payable from other money since wrapping produces no cash.

Hypothetical example 2: a casual holder receives airdropped tokens worth $500 and is not taxed on receipt, with $500 as the first element of cost base. Selling eight months later for $800 gives a $300 gain with no discount, all added to assessable income.

What to watch: the 2 November lodgment date, any High Court judgment date, whether the ATO finalises either draft first, and 1 July 2027, when the Tax Reform No. 1 Act 2026 replaces the 50% CGT discount with indexation and a 30% minimum tax for gains from that date.