Australians are increasingly trading in cryptocurrencies and holding them as a form of investment. As a result, cryptocurrencies are more frequently becoming part of the pool of assets following separation in family law financial matters.
A cryptocurrency is a digital currency that is secured by cryptography on a decentralised network. There is no special treatment of cryptocurrencies under Australian family law. They are treated as an asset, in the same way savings held in a bank account are treated. A Family Law Court has jurisdiction to order parties to deal with cryptocurrencies, such as ordering its sale and the distribution of the proceeds, or the transfer of cryptocurrency from one party to the other.
Although treated the same in principle, there are several factors that make cryptocurrencies more commonly the subject of dispute than other forms of assets:
- Disclosure. It is easier to hide cryptocurrency holdings from a partner than real estate or bank savings. Because cryptocurrencies are decentralised, a third party (such as a bank, ASIC or Land Registry Services) cannot provide details of privately held cryptocurrency.
- Information asymmetry. Cryptocurrencies are not as widely understood as other assets. Often only one party fully understands the investment details, while the other party is left in the dark following separation.
- Fluctuations in value. Cryptocurrencies are among the most volatile assets, potentially resulting in windfalls, or eye-watering losses, and a dispute over who should share the gains or losses.
- Misadventure. By design, once a cryptocurrency transaction is made it cannot be reversed, and once access to a private wallet is lost it cannot be recovered.
If you hold cryptocurrencies
Collate records relating to acquisition and disposal during the relationship or following separation, including:
- Bank statements listing payments to an exchange
- Records of any mining activity or delegate payments
- Transaction listings from your exchange
- A listing of your cryptocurrency transactions
Be aware of any outstanding tax liabilities and offsets related to disposed cryptocurrencies. The Australian Taxation Office has published guidance on cryptocurrency tax treatment. Ensure you still have secure access to your holdings, and if you have lost holdings previously, retain copies of any correspondence or documents evidencing that loss.
If your former partner has held cryptocurrencies
Provide your legal representative with clear instructions about your knowledge of their cryptocurrency holdings, including any relevant communications and documents. Keep records of any joint funds contributed to those holdings, and where possible establish the amount invested, the investment date and the specific cryptocurrencies purchased.
This article is general information, not legal advice. For guidance on your situation, book a confidential consultation.
