Crypto And Self Managed Superannuation Funds
The value of cryptocurrency assets inside Australian Self Managed Superannuation Funds (SMSFs) increased by 589.9% ($1.17 billion) between June 2019 and June 2022, according to the latest ATO statistics.
Although cryptocurrency makes up only 0.16% of the $837 billion held in SMSFs, more trustees are choosing to invest in it, making it a growing asset class. It is larger than collectibles and personal use assets, and overseas property.
Smaller funds, with an asset value below $200,000, are more likely to have a larger proportion of their value in cryptocurrency.
ASIC warns of SMSF cryptocurrency scams:
Earlier this year, the Australian Securities and Investments Commission (ASIC) issued a warning on an increase in marketing encouraging Australians to switch from retail superannuation funds to SMSFs so they can invest in ‘high return’ portfolios.
The regulator states that crypto-assets are a high risk and speculative investment. Best practice is to seek advice from a licensed financial adviser before agreeing to transfer superannuation out of a regulated fund into an SMSF.
Contact our Aintree Group Wealth team here.
Investing in crypto:
Trustees are free to invest in assets that meet the requirements of the fund and comply with the regulatory requirements:
- Trust Deed – must allow for cryptocurrency assets. Most SMSF trust deeds allow trustees to invest in any assets permitted under superannuation laws. They leave it to the investment strategy to guide the choice of assets and assess their suitability. However, it is important to check.
- Investment strategy – With cryptocurrency’s high volatility and risks, there must be clearly articulated information in the Investment Strategy. That is, it must articulate the trustees’ plan for making, holding and realising assets in a in a way that is consistent with the retirement goals of members being mindful of the member’s individual circumstances.
- Separation of assets. Cryptocurrency assets are held in a wallet in the name of the SMSF. The IP address is provided to the SMSF auditors to verify the transactions (against the fund bank account). Problems often arise when someone links a wallet in the SMSF’s name to a personal credit card to buy cryptocurrency. In these situations, the payment may count as either a contribution or a loan to the SMSF.
- Sole purpose test. Your SMSF needs to meet the sole purpose test to be eligible for the tax concessions normally available to superannuation funds. Your fund needs to be maintained for the sole purpose of providing retirement benefits to your members, or to their dependants if a member dies before retirement.
To learn more about Cryptocurrency and Tax, click here!
This is general advice only and has not been prepared with your situation and needs in mind. For individual and personalised advice, we highly recommend that you seek out proper professional advice from your accountant.
