There have recently been more enquiries from Trustees about the purchase of crypto currency with SMSF money.
Many clients have already started their journey with this asset and others are doing their due diligence on the appropriateness of this asset for their members. Whilst we don’t have an opinion on whether or not you should include it in your SMSF portfolio, we can tell you that it is a legal asset to hold in your SMSF as long as you follow the rules.
Here is the accounting treatment of Crypto inside of SMSF.
1. Cryptocurrency assets are not treated as a cash investment.
2. Cryptocurrency will trigger capital gains tax event if sold with a profit, but triggers capital loss event when sold at a loss.
3. The costs involved in cryptocurrency trading are accounted for as an increase in the asset cost base and not as a tax deduction.
Below is a short guideline on how to remain compliant.
1. Obtain and supply the 30 June Market Value from a reputable digitation currency exchange that publishes historical cryptocurrency values such as Coin Spot.
2. Confirmation of Ownership of the Cryptocurrencies (30th of June each year).
a. The SMSF needs to have its wallet entirely separate from any personal crypto wallets.
b. Auditors need to verify that your SMSF is the owner so make sure the purchse and holding of units is in the SMSF’s name.
3. Transactions in the cryptocurrency wallet should be traceable to the SMSF’s bank account.
4. Signing of declaration of trust which states that the SMSF is the beneficial owner of the cryptocurrency if a report is not able to demonstrate the account is in the name of the SMSF.
5. Trust Deeds of the SMSF must not prohibit the purchase and holding of cryptocurrency.
6. Investment Strategy documents must include the purchase and holding of cryptocurrency and the impact they have on the risk, return, diversification & liquidity of the SMSF.
7. Don’t buy coins from yourself – make sure you purchase from a third party or off an exchange.
8. Make sure you don’t get scammed by people purporting to buy coins on your behalf. Complete your due diligence on the platform and complete searches online for possible illegal activities.
For a no obligation discusion on how to set up your SMSF to be in a position to invest or to discus your current SMSF compliance please email [email protected]
