What’s the ATO’s current stance on crypto and SMSFs?
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Are you an SMSF adviser who is getting more and more requests from clients who want to incorporate crypto into their long-term savings plans?
With $227 million AUD as of December 31 2021 being incorporated into Australian self-managed super funds, and growing every day, it should come as no surprise that clients are looking to invest in crypto via their SMSFs.
In June 2019, the ATO added crypto to the list of assets approved to be held by SMSFs. Since then, guidelines have been released as to the record-keeping needs required for crypto held in SMSFs. Firstly, the ATO has clarified that any SMSF crypto investments must:
- Be allowed for under the fund’s trust deed
- Be in accordance with the fund’s investment strategy
- Comply with SISA and SISR regulatory requirements concerning investment restrictions
On top of these requirements, the ATO has stated that the fund must maintain and be able to provide evidence of a separate crypto wallet so that crypto investments can be assigned a fair market value. This may seem like a daunting prospect, especially when it comes to the more obscure types of crypto tokens whose price history is hard to source. As an SMSF adviser, you will need to make sure your clients are aware that they must maintain adequate records of all of their crypto investments.
Crypto tax software like CryptoTaxCalculator can make this process much simpler: if your client imports their data into the app, they will be provided with a transaction history that categorises transactions accordingly, tracks cost basis, and provides total capital gains and losses. They can then use these records to maintain compliance as part of their SMSF.
The ATO also recommends that SMSF trustees and members should consider the risk levels of particular crypto investments before proceeding. With crypto, market liquidity is of utmost importance when assessing risk levels. If the crypto that your client wants to invest in has limited liquidity, then it could heighten the amount of risk involved. This is where the ATO recommends that a diversified portfolio is important.
If you’re an SMSF adviser, then it’s of utmost importance that you stay across the developments in this area so you can provide your clients with the best possible advice. If you already have clients invested in cryptocurrency, then you should take the opportunity to remind them of the importance of record-keeping and what avenues they can take to do so.