We strongly encourage SMSFs to seek independent professional advice before undertaking any new investment in their SMSF, including investments in cryptocurrencies.
Regulatory issues Cryptocurrencies, such as bitcoin, are CGT assets and SMSFs may acquire, dispose of or invest in which crypt invest these as they would in any other asset.
When an SMSF engages in these transactions it must comply with the same regulatory requirements that apply to investments in other assets. Before investing in cryptocurrency, SMSF trustees and members should consider the level of risk of the investment.
This includes ensuring the SMSF has clear ownership of the cryptocurrency. This means the fund must maintain and be able to provide evidence of a separate cryptocurrency wallet for the SMSF from that used by trustees and members personally. See also: Reg 4.
The value in Australian dollars will be the fair market value which can be obtained from a reputable digital currency exchange or website that publishes its rates publicly. The value of cryptocurrency can change constantly. For the purpose of calculating member balances at 30 June, the ATO will accept the 30 June closing value published on the website of a cryptocurrency indicators and signals for binary options that reports on historical cryptocurrency values.
See also: Valuation guidelines for self-managed superannuation funds Related-party transactions With certain exceptions, SMSFs are prohibited from intentionally acquiring assets from related parties. The exceptions include listed securities and business real property, when acquired at market value.
They therefore cannot be acquired from a related party. It follows that SMSF trustees and members — being related parties of the fund — cannot make in specie contributions or other transfers of cryptocurrency to the fund.
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Sole-purpose test An SMSF must be maintained for the sole purpose of providing retirement benefits to trustees and members, or to their dependants if a member or trustee dies before retirement. It is unlikely that an SMSF will meet the sole-purpose test if trustees or members, directly or indirectly, obtain a financial benefit when making investment decisions and arrangements.
Pension or benefit payments Where a trustee or member satisfies a condition of release, the SMSF can make an in specie lump sum payment by in which crypt invest of transfer of cryptocurrency. However, pension payments must be made in cash.
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Voluntary disclosures If trustees or members believe they may have breached the super laws, they should work with their professional advisers to rectify the breach as soon as possible.
They should also consider making a voluntary disclosure using the SMSF early engagement and voluntary disclosure service.
This material highlights some regulatory issues arising for SMSFs investing in cryptocurrencies or digital currencies such as bitcoin. Last modified: 16 Mar QC Footer.