Trustees considering investing in Cryptocurrency with their Self-Managed Superannuation Fund (SMSF) need to consider the following to ensure that there are no unexpected surprises.

All investments made by a SMSF need to be allowed under the fund’s Trust Deed and must also comply with the fund’s Investment Strategy.

In addition to these the investment must be held in the name of the SMSF and be valued in accordance with the ATO guidelines.

The ATO have been clear in their direction to SMSF Trustees that the assets of an SMSF need to be clearly distinguished from any personal or business assets and that clear legal ownership by the fund is shown.

Fund assets should be held in the name of

• The Individual Trustees “as trustees for” the fund
• The Corporate Trustee “as trustee for” the fund

The ATO further advise that the easiest way to comply with the ownership rules is to have a company set up solely for the purposes of being the Corporate Trustee of the fund.

Ownership of the investment is required at a minimum each year. It is therefore advisable to maintain accurate and complete records of each investment while paying close attention to the 30 June confirmation of holding.

The ATO’s approach to the valuation of fund assets it to ensure that accurate and meaningful SMSF Financial Reports are being prepared. Ordinarily funds assets are required to be re-valued each 30 June or when a relevant super event occurs.

Trustees must be able to demonstrate that the valuation has been arrived at using a “fair and reasonable” process. For assets that trade on a platform, the price of the trade value on 30 June will be the most appropriate value to use.

In 2014 the ATO released two taxation determinations TD 2014/25 and TD 2014/26. The first confirming that Bitcoin is not a foreign currency for the purposes of Division 775 of the Income Tax Assessment Act 1997. The second that Bitcoin is a CGT asset for the purposes of subsection 108-5(1) of the Income Tax Assessment Act 1997. While these determinations specifically speak about Bitcoin, the ATO have confirmed that it will extend to other forms of Cryptocurrency that the same characteristics as Bitcoin.

Taxation of assets in a SMSF that make a capital gain after having been held for more than 12 months are afforded a 1/3 discount, this effectively means that the rate of tax for these is 10%.

However, if a SMSF makes a capital gain from an asset that is supporting a pension, then the effective rate of tax is 0%.

With certain exceptions, SMSF’s are prohibited from intentionally acquiring assets from a related party. These exceptions include listed securities and business real property. Cryptocurrencies are not listed securities as per the ATO guidelines and do not fall within the exceptions. Therefore, they cannot be acquired from a related party.

If you have any questions or would like further clarification in regards to any of the above, please feel free to give me a call to arrange a time to discuss on (07) 5655 4410 or email me on admin@cybersmsf.com.au