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ATO Issues Update on Cryptocurrency Compliance Traps

On March 19, the ATO released further details on some of the regulatory considerations of cryptocurrency for SMSFs including valuations in particular contributions and ownership of assets. 

The compliance issue exists where SMSF transacts in cryptocurrencies and SMSF trustees and members should be aware of the tax consequences that could occur with cryptocurrencies and keep records of all transactions for regulatory considerations.

Compliance tips outlined by the ATO for cryptocurrency transactions for SMSFs include:

Investment strategy and trust deed
The investment must be allowed under the fund's trust deed, be in accordance with the fund's investment strategy and comply with SISA and SISR regulatory requirements. 

Ownership and separation of assets
SMSF cryptocurrency investments must also be held and managed separately from the personal or business investments of trustees and members.

SMSFs must ensure their investments in cryptocurrency are valued in accordance with ATO valuation guidelines.

Related-party transactions
The ATO also noted that cryptocurrencies such as bitcoin are not listed securities and therefore cannot be acquired from a related party.

Sole-purpose test
An SMSF is unlikely to 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 way of transfer of cryptocurrency. However, pension payments must be made in cash.

For a full review of the treatment of cryptocurrencies from the ATO view this article.

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