Introduction
Over the past decade, the world and in particular Australians have turned to digital investments such as cryptocurrencies and non-fungible tokens (NFT). While these investments can be lucrative to individuals, they raise new and complex issues when relationships break down. Australian family law requires all assets which includes digital assets to be disclosed and considered during a property settlement.
Under the Family Law Act 1975 (Cth), the Court assesses the total asset pool of the parties. This includes traditional property such as homes or cars as well as emerging classes of digital property.
What are Digital Assets?
Digital assets are:
- Property: This means they are treated as capable of ownership, value and transfer.
- Part of the Asset Pool: They must be disclosed and included in the calculation of net assets.
- Subject to Division: The same principles applied to bank accounts or shares are applied to digital assets.
Challenges in Valuing Digital Assets
Although treated the same as other assets they present unique difficulties such as:
- Volatility – The value of Bitcoin can fluctuate dramatically within days and as a result courts require expert evidence or a valuate at a specific point in time.
- Proof of Ownership – Digital assets tend to be stored in digital wallets and a lot of these are concealed which tend to raise complexities and issues in terms of non-disclosure or asset hiding.
- Tracing Transactions – Digital assets have the unique ability to be transferred to other accounts very quickly, in some cases, instantly. This could make it hard to track such assets.
Consequences of non-disclosure
Any individual who fails to disclose any digital assets risks significant penalties. In extreme cases, hiding digital assets can even amount to criminal conduct, such as fraud or contempt of court.
What Should Parties Do?
For those going through a separation or divorce, there are a few considerations such as:
- Full Disclosure – Both parties must disclose all digital assets such as crypto holdings, wallets and NFTs.
- Legal Advice - Engage with family lawyers like us to get experienced advice on how to navigate the disclosure and division of digital assets.
Conclusion
In Australia, Cryptocurrencies and NFTs are considered property under Australian Family Law. They must be disclosed, valued and divided within a property settlement just like traditional assets.