Thinking About Investing In Crypto Assets Through Your SMSF?

The rise in popularity of cryptocurrency has led to more and more Australians looking at these markets as an investment opportunity. While cryptocurrency is a decentralised exchange (meaning that the transactions are peer-to-peer), there is a common misconception that this means that government bodies do not have access to the same information. Increasingly, as we review more and more client records provided by the ATO, we are seeing the following statement “Your client held or disposed of cryptocurrency that may have resulted in a capital gains event”. The ATO has outlined its thoughts on investing in cryptocurrency below and have raised some key areas that taxpayers should be aware of. If you have queries about what tax implications might impact you from cryptocurrency investment, please reach out to Salt Financial Accountants.

When investing in crypto assets through a self-managed super fund, you must ensure it is allowed under the fund’s trust deed, is made in accordance with the fund’s investment strategy and you have considered the level of investment risk, given the highly volatile nature of the investment.

From a regulatory perspective, it's important that:

  • The crypto assets are owned by the fund and are held separately from your own personal or business assets. This means the fund must have its own digital wallet, separate to any used by you for personal or business purposes

  • The investment is valued at market value in line with the ATO’s valuation guidelines

  • Any crypto assets that a member or related party hold personally are not sold to the fund or transferred to the fund as a contribution

  • The investment is consistent with the sole purpose test and does not involve the giving of financial assistance to a member.

From a tax perspective you also need to be aware of:

  • Your tax responsibilities when buying, selling or investing in crypto assets which must be undertaken on arm's length terms

  • The income tax consequences of common transactions involving crypto assets

  • As a crypto asset is a capital gains tax (CGT) asset, there are CGT implications when disposing of it. You need to work out if there is a capital gain or loss arising from the disposal and report it on the SMSF tax return

  • Income associated with crypto assets that you hold, such as staking rewards, also needs to be reported on the return.

You must keep records of all transactions associated with acquiring, holding, and disposing of crypto assets.

If you're considering investing in crypto assets, we recommend you contact us before making any decisions as we will be able to assist in navigating you through the process.

The MoneySmartExternal Link section on ASIC's website also has some useful information on investing in crypto assets including how to avoid scams.

Source: https://www.ato.gov.au/Super/Sup/Thinking-about-investing-in-crypto-assets-/

Jenni Anderson