The Drawbacks of Including Crypto in Your SMSF

Over the years, cryptocurrency has traversed a lengthy path to establish itself as a legitimate and relevant form of currency in society. 

Nevertheless, there are still sceptics who remain unconvinced by the hype and caution investors to exercise vigilance when dealing with this highly volatile asset class.

Some investors have gone as far as incorporating cryptocurrency into their Self-Managed Superannuation Funds (SMSFs), but it's crucial for them to be fully aware of the associated risks. 

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The ATOs Relationship with Crypto

To comprehend these potential risks, it's important to first understand how the Australian Taxation Office (ATO) regulates cryptocurrency.

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For SMSFs to engage in cryptocurrency investments, they must ensure that:

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• These investments align with the fund's trust deed.
• They are consistent with the fund's established investment strategy.
• They comply with the regulatory requirements specified in the Superannuation Industry (Supervision) Act (SISA) and Superannuation Industry (Supervision) Regulations (SISR) concerning investment limitations.

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Additionally, the ATO strongly encourages seeking financial advice when dealing with cryptocurrency.

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The Downsides of Crypto

One of the primary downsides of including cryptocurrency in an SMSF, aside from its unpredictable and volatile nature, pertains to the audit process. Before delving into the audit situation, consider a prime example of cryptocurrency risks: fraudulent coins claiming affiliation with reputable entities like Netflix, which have scammed investors out of significant sums.

This unfortunate reality is increasingly prevalent, even with legitimate cryptocurrencies whose value is influenced by society's perception of their exclusivity.

Returning to the audit issue, SMSFs holding cryptocurrency in an offline wallet may encounter difficulties in proving ownership or existence to satisfy auditors. In cases where an SMSF asset cannot be properly assessed, this can lead to a notice to freeze the assets within the SMSF.

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Conclusion

For SMSF investors seeking tangible investments, it may be worth considering SMSF property investments. 

Connect with our team today to embark on your SMSF property investment journey.

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