Digital assets are becoming increasingly common in Australian family law matters. In our experience, many people do not realise that cryptocurrencies, NFTs (Non-Fungible Tokens), and even valuable online gaming items can be treated as property by the Federal Circuit and Family Court of Australia (‘FCFCOA’).
Although these assets exist online and cannot be physically touched, the court still considers them to be property in the same way as money in a bank account, shares, cars, or real estate. This means they must be disclosed during a property settlement.
How the Court Treats Digital Assets
In Australia, parties involved in a family law property dispute are required to provide full and honest financial disclosure. This obligation is set out in the Family Law Act 1975 (Cth). In simple terms, each party must disclose all of their assets, debts, income, and financial resources to the other party and to the court.
In our view, the important point is straightforward: if something has value and can be sold or transferred, the court is likely to treat it as part of the property pool.
That includes digital assets such as:
- cryptocurrencies like Bitcoin or Ethereum;
- NFTs;
- online trading accounts; and
- valuable gaming assets or digital collectibles.
The Difficulty of Valuing Digital Assets
One of the major problems with digital assets is that their value can change very quickly. A cryptocurrency may be worth significantly more or less within a short period of time.
Because the court usually values property at the date of the final hearing, this can create uncertainty for both parties.
In some matters, we may advise that the digital assets be valued at an agreed time so their value is fixed, for example the date of a mediation conference. In other cases, one party may keep the digital assets while the other party receives something more stable in value, such as a larger share of the equity in a home or superannuation.
Some digital assets, particularly NFTs, can also be difficult to value because there may not be many comparable sales. In those cases, an expert valuation may be necessary.
Hidden Digital Assets and Disclosure Issues
In our experience, one of the most difficult issues involving digital assets is locating them.
Unlike ordinary bank accounts, digital assets can sometimes be stored privately in digital wallets that are difficult to trace. This can make it easier for a person to attempt to hide assets from the other party.
For that reason, careful examination of financial records is often required. We may review:
- bank statements;
- tax returns;
- trading records; and
- transaction histories involving cryptocurrency exchanges.
The court also has broad powers to order a party to produce documents and financial records if there are concerns that assets have not been disclosed properly.
Consequences for Failing to Disclose Assets
The court takes non-disclosure very seriously. If a person attempts to hide digital assets or fails to disclose them properly, the court may draw negative conclusions against them.
For example, in Blackwood v Blackwood [2021] FamCA 268, the court treated the undisclosed assets as being worth more than the party had admitted. This resulted in an adjustment to the property division against that party.
A person who fails to disclose assets may also be ordered to pay the legal costs of the other party.
In our opinion, the message from the court is clear: digital assets are not beyond the reach of Australian family law simply because they exist online. Anyone involved in a family law property matter should ensure that these assets are properly disclosed and carefully considered during settlement negotiations or court proceedings.
If you are separating and believe digital assets may form part of your property pool, we can help you understand your obligations, identify what needs to be disclosed, and guide you through the process. Get in touch robert.kropp@arch.law.
