Bitcoin fuels flurry of SMSF set-up enquiries

“We have a huge number calling about bitcoin. They want to access some money for trading, and they see their super fund as a space to do that,” Ms Brown told SMSF Adviser.

Typically, the investors are in their 30s with low-balance funds, and they are principally motivated by bitcoin gains as opposed to managing their own superannuation.

H&R Block doesn’t offer them investment advice, but stresses the compliance and tax considerations of an SMSF, often catching prospective trustees by surprise.

“Obviously, any gains you make on your trading will be taxed — they are a capital gain. But some of the people we speak to just think it’s a free windfall,” she said.

“Also, there are certain costs and definitely responsibilities involved in setting up an SMSF, which we remind them of. That doesn’t seem to be a consideration,” she said.

The ATO signalled bitcoin, and other cryptocurrencies, will be in its sights this tax time.

Broadly, there is concern that investors don’t understand the capital gains tax (CGT) implications of investing in cryptocurrency. When cryptocurrency is held in an SMSF, there is an added layer of complexity with tax compliance that the ATO has its eye on.

“The nature of bitcoin and other cryptocurrencies may mean that compliance with the regulatory rules and restrictions that apply to SMSF investments is more difficult – for example, the regulatory requirement that the fund’s assets are managed separately from the member’s personal and business assets and ensuring that the SMSF has clear legal ownership of the bitcoin or relevant cryptocurrency, as well ensuring that the investment is appropriately valued for both accounting and tax purposes,” said ATO deputy commissioner James O’Halloran last month.

For the latest regulatory guidance on SMSFs and cryptocurrency, click here.

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