Seribu Pty Ltd and Commissioner of Taxation (Taxation)

The case of *Seribu Pty Ltd and Commissioner of Taxation* concerned a dispute over the deductibility of a loss incurred by the taxpayer, Seribu Pty Ltd, from its dealings in Bitcoin. The taxpayer had acquired Bitcoin and later used some of it to settle a payment, incurring a loss when the value of the Bitcoin at the time of settlement was less than its acquisition cost. The taxpayer sought to deduct this loss from its assessable income under Division 775 of the *Income Tax Assessment Act 1997* (Cth), which deals with foreign exchange gains and losses. The Commissioner of Taxation disallowed the deduction, leading to the matter being heard by Deputy Bernard J McCabe P.

The central legal issue before the court was whether Bitcoin, a cryptocurrency, constituted "foreign currency" as defined or understood within the context of Division 775 of the *Income Tax Assessment Act 1997*. Specifically, the court had to determine if losses arising from transactions involving Bitcoin could be treated as foreign exchange realisation losses, thereby qualifying for deduction. This required an interpretation of the term "foreign currency" as used in the Act and its application to a digital asset not issued by a government.

The court reasoned that the definition of "foreign currency" in section 995-1 of the *Income Tax Assessment Act 1997* means "a currency other than an Australian currency." Drawing on established legal principles, including observations from Brennan J in *Leask v The Commonwealth* and Starke J in *Goldsborough Mort & Company Ltd v Hall*, the court understood currency to consist of notes or coins issued under the laws of a country for use as a medium of exchange. Bitcoin, not being issued by a government or identified with a particular jurisdiction, did not fit this established understanding of currency. The court noted that while amendments to GST legislation included the term "digital currency," this did not assist in interpreting "foreign currency" within the income tax assessment legislation.

Ultimately, the court affirmed the Commissioner's objection decision. Deputy Bernard J McCabe P concluded that, based on the law as it currently stood, Bitcoin did not qualify as foreign currency for the purposes of Division 775. While acknowledging the potential policy arguments for including such gains and losses within the foreign exchange rules, the court held that this was a matter for law reform rather than judicial interpretation.