Cryptocurrency has come a long way in establishing credibility and relevance as a valid form of currency within society.
However, despite its progress, there remain sceptics of cryptocurrency, cautioning investors to approach this volatile asset class with care.
Even so, some investors within Self-Managed Superannuation Funds (SMSFs) are willing to incorporate this intangible asset into their portfolios.
These SMSF investors must acknowledge and understand the associated risks of integrating cryptocurrency into their SMSFs.
To comprehend these potential risks, it’s crucial to grasp how the Australian Taxation Office (ATO) regulates cryptocurrency.
SMSFs must ensure that cryptocurrency investments:
- align with the fund’s trust deed;
- adhere to the fund’s investment strategy;
- comply with regulatory requirements of the Superannuation Industry (Supervision) Act (SISA) and Superannuation Industry (Supervision) Regulations (SISR) regarding investment restrictions.
In addition to these ATO regulations, seeking financial advice concerning cryptocurrency is strongly encouraged.
One of the primary disadvantages of investing cryptocurrency within an SMSF, apart from its unpredictable and volatile nature, pertains to the auditing process.
Before delving into the audit concerns, let’s examine an instance of cryptocurrency risks—such as scams where investors were defrauded of millions under the guise of a fake coin claiming affiliation with Netflix.
Unfortunately, this disturbing reality has become increasingly prevalent, even with legitimate cryptocurrencies, as their value is influenced by society’s perception of exclusivity.
Returning to audits, SMSFs holding cryptocurrency in an offline wallet might face challenges in proving ownership or existence to satisfy auditors.
When an SMSF asset cannot be adequately assessed, it may prompt a notice to freeze the assets within the SMSF, affecting the members.
For SMSF investors seeking tangible investments they can see and touch, it’s worth considering SMSF property investment.
Reach out to our team today to initiate your SMSF property investment journey.