Bitcoin and Cryptocurrenices: A Bonanza for SMSFs or a Bubble That May Burst?

2 min read

You may be aware bitcoin is a decentralised crypto or digital currency utilising block chain technology online (not ‘on’ the line, for some of us less technologically savvy). Exchanges of cryptocurrency goes directly between coin users without having to have a bank or middleman involved.

Although bitcoin has been in existence since 2008 it has more recently become very popular. Increasingly stakeholders who have SMSFs are investing in this cryptocurrency “asset” and some are making good returns.

Sounds like a good way to go for SMSFs? Maybe.

Currently the only way to invest into cryptocurrencies with your Superannuation is through a Self-Management Superfund (SMSF). You can form a SMSF through accountants or business lawyers, however recommend seeking financial advice prior to investing in crypocurrenices  through your SMSF.

SMSF’s need to be mindful of the following 5 PBL checks and balances they apply to such an investment:

1. Investment strategy
Your SMSF investment strategy must allow Cryptocurrency trading. Your investment Strategy can be updated to include Cryptocurrencies if you have an existing SMSF.

2. Trust deed amendment
The trust deed may need to be amended to give the trustee the power and authority to invest in Cryptocurrency and the rules around how this is to be done.

3. Ownership and title issues
Bitcoin or Cryptocurrency assets must be purchased in the name of your SMSF. The bitcoin investment may not be properly described or characterised in a manner which identifies the trustee as the entity or person holding title for the SMSF as the owner. This could lead to other problems when dealing with compliance with SMSF legislation.

4. Regulation 4.09 A may be offended
Ensure you store your bitcoins in a secure, independent, insured, location. Under this super regulation each asset in the superfund must be individually identified and assets are to be kept separate from personal or other entity property. Unless the bitcoin investment is clearly identified as belonging to the SMSF there are going to be noncompliance issues here.

5. Section 66 compliance issues 
Under this section transfers of assets from related parties are outlawed. Accordingly, transactions relating to bitcoin will need to be between the fund and non-related third parties only, otherwise the NALI rules will be breached.
Australian Tax Office

 The tax office has issued 2 rulings about bitcoin (TD 2014/25 and TD 2014/26) [there are further rulings that deal with Fringe benefits tax and income tax however these are directly relevant to SMSF].

The first raises issues about what bitcoin actually is as it appears not to come within the definition of money.

The second is more hopeful in that it appears to identify bitcoin as a form of property which can be subject to CGT.

If you are concerned about the issues raised in this article or are looking for advice about such matters then contact David Prior or Raea Khan on 1300 965 689

We’d recommend reviewing the below information from moneysmart.gov.au in considering risks and benefits of cryptocurrency investing.

The money smart site has a great section dedicated to crypto currency – CLICK HERE

 

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I have experienced an excellent service from PBL (especially from Anita) during the sale of my recent property on Central Coast, and during the purchase of our current property in Sydney. Throughout many challengers, especially with the sale, Anita presented her very professional and knowledgeable conveyancer, positively solving all obstacles. "Above and Beyond" Award going to Anita!!! :-)
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The five-star reviews are well-deserved. I needed a motion and a bylaw drawn up for urgent repairs of my strata unit and the AGM was in two weeks' time. My solicitor was friendly, efficient, knew what documents to ask for, and had all the paperwork prepared well within the timeframe. She also took the time to run through all the legalese and the different possible scenarios with me to make sure I understood. I am so glad to have found this firm and I will not hesitate to use their services again in future if the need arises.
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Our Commercial Property conveyancing was handled very professionally. Anita’s experience and responsiveness was an asset in this transaction.
Trace M
I am so grateful for Anita Bradley from PBL Law Group helped me with this property settlement, she has went above beyond to ensure I understand everything because of our deafness. I will recommended Anita or their team. Thank you so much for all the hard work you have done for us.
Tricia Wheatstone
For almost 18 months I have been a client of Alex Ilkin. Alex is very knowledgeable and professional and has consistently provided me with thorough, honest and well set out advice, including steering my case through appeal proceedings. He always worked for my best interests with integrity and compassion. I recommend Alex and his team at PBL.