SMSFs Investing In Cryptos
When people look to run an SMSF rather than invest their super into an industry or retail fund, there are many investment classes that are available depending on the individual's appetite to risk.
However, with the rise of cryptocurrency as an alternative payment mechanism over the past few years and its subsequent crash in the later stages of 2017 and 2018 proved that this asset class is volatile, unpredictable and in essence a high-risk investment.
Digital currency exchange providers in Australia are now required to register with AUSTRAC and follow new guidelines in relation to keeping customer identity records and reporting suspicious transactions. The principal aim of this increased regulation is to reduce money-laundering and combat terrorism, rather than reducing the risk for investors.
At the SMSF Association National Conference in February 2018, the ATO’s Australian Taxation Office’s Deputy Commissioner of Superannuation James O’Halloran stated that “while the regulatory and tax laws that apply to SMSFs don’t specifically prohibit investment in bitcoin or other cryptocurrencies, in addition to the tax considerations that arise, there are also super regulatory matters that must be considered by anyone contemplating investing in cryptocurrencies in their super fund".
While not illegal, not only are cryptocurrency investments highly speculative and risky, they are set to be scrutinised come tax time.
With many investors in the crypto space only ‘investing what they can afford to lose’, some individuals have made it big, while others have lost it all. SMSF Trustees are strongly encouraged to seek independent professional advice before undertaking any new type of investment in their fund.
See James O'Halloran's SMSF Association address & full speech here