ATO’s Bitcoin super warning
‘We had people waiting for 1½ hours ... before they could get in to make a purchase’
PAUL ENGEMAN ON SMSF DEMAND
The Australian Taxation Office has warned trustees of self-managed super funds of the dangers of investing in Bitcoin and other crypto-currencies, amid an investment surge and dramatic losses.
The ATO, which regulates selfmanaged funds, said there was growing interest in cryptocurrency investment by SMSFs, but the relatively new asset class posed risks.
In advice provided to The Weekend Australian, the ATO said there was no specific prohibition on SMSFs investing in cryptocurrencies, but it warned of the need to maintain a clear separation between personally owned crypto-currency assets and those owned by the fund.
It cautioned that SMSF-held assets must be suitable as retirement investments.
“Some of the unique features of Bitcoin and crypto-currencies may make it more difficult for SMSF trustees to maintain compliance … particularly in relation to the requirement that ownership of SMSF assets are kept clearly separate from the trustee’s personal assets,” the ATO said.
“As is always the case with any SMSF investment, SMSF trustees need to ensure that an investment of this nature is consistent with their fund’s investment strategy.”
It said trustees should also be aware that Bitcoin and cryptocurrencies were not exempt from the general prohibition against SMSFs acquiring assets from related parties. In order to qualify for superannuation tax concessions, SMSF’s need to prove they are for the sole purpose of retirement benefits of members.
The ATO is currently preparing general advice on superannu- ation regulatory issues as part of broader advice on tax issues relating to crypto-currencies.
More than $500 billion has been wiped off the global cryptocurrency market since the start of the year, after a speculative preChristmas frenzy turned sour.
One Bitcoin was worth $10,200 yesterday — down from $25,800 in December, but still up nearly 1000 per cent for those who bought 12 months ago.
Self-Managed Superannuation Fund Association chief executive John Maroney compared investing in crypto-currencies to investing in start-ups or buying bonds from distressed Third World countries.
“Bitcoin and crypto-currency in general would fall into the cate- gory of speculative assets. These are ones where you really need to be prepared to lose the lot,” Mr Maroney said.
“It’s unlikely to be considered a suitable feature of a retirement investment strategy to hold much in the way of speculative assets.”
Mr Maroney said funds with more than a small proportion of speculative investments risked non-compliance and stiff penalties.
Queensland gold and silver dealers Ainslie Bullion started dealing in crypto-currencies in August last year.
Director Paul Engeman said demand from SMSF investors had been “extraordinary”.
“It’s a very large part of our customer base,” he said. “At one stage we had people waiting for 1½ hours in the waiting room before they could get in to make a purchase.”
Mr Engeman said the firm provided the required documentation to meet ATO requirements.
“Just as we do with bullion, we prepare an invoice in the fund’s name that shows how much was purchased and, importantly, the address of the wallet where it was loaded.”
He said the public nature of crypto-currency blockchains — the distributed ledgers on which they are built — made the asset class “highly auditable”.
The ATO has in recent times issued guidelines that gains from crypto-currency investments are taxable and subject to capital gains tax rules, but it has made no formal rulings.