ATO’s Bit­coin su­per warn­ing

The Weekend Australian - - THE NATION - BEN PACKHAM

‘We had peo­ple wait­ing for 1½ hours ... be­fore they could get in to make a pur­chase’


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.

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