Trekk Advisory accountant talks to client about cryptocurrency on super funds on the telephone.
October 19, 2022 By Troy Furness

Australian super funds gorge on cryptocurrency

Share:

The value of cryptocurrency assets inside Australian self managed superannuation funds (SMSFs) increased by 589.9% ($1.17bn) between June 2019 and June 2022, according to the latest ATO statistics.

While cryptocurrency is a relatively small asset class at only 0.16% of the $837bn held in SMSFs, it is a growing asset class, larger than collectibles and personal use assets, and overseas property.

Smaller funds, with an asset value below $200,000, are more likely to have a larger proportion of their value in cryptocurrency.

ASIC warns of SMSF cryptocurrency scams

Earlier this year, the Australian Securities and Investments Commission (ASIC) issued a warning on an increase in marketing encouraging Australians to switch from retail superannuation funds to SMSFs so they can invest in ‘high return’ portfolios. The regulator states that crypto-assets are a high risk and speculative investment and best practice is to seek advice from a licensed financial adviser before agreeing to transfer superannuation out of a regulated fund into an SMSF.

An example of one of these schemes was A One Multi Services Pty Ltd that was shut down by ASIC late last year. The company promoted a scheme encouraging investors to roll their superannuation into an SMSF, then for the SMSF to loan money to A One Multi to generate “returns of between 10% and 20% on the investment and perhaps as high as 26%.” Over 60 SMSFs transferred $25 million into A One Multi’s accounts between January 2019 and June 2021. The money “invested” for the clients, between $7 million to $22 million of Bitcoin, was held in the name of one of the directors. An additional $5.7m was used by the directors to acquire property and luxury cars.

Investing in crypto

Trustees are free to invest in assets that meet the requirements of the fund and comply with the regulatory requirements:

  • Trust Deed - must allow for cryptocurrency assets. Most SMSF trust deeds are drafted broadly to enable trustees to invest in assets permitted by the superannuation laws and leave the investment strategy to manage the choice of assets and their appropriateness. However, it is important to check.

  • Investment strategy - With cryptocurrency’s high volatility and risks, there must be clearly articulated information in the Investment Strategy. That is, it must articulate the trustees’ plan for making, holding and realising assets in a in a way that is consistent with the retirement goals of members being mindful of the member’s individual circumstances.

  • Separation of assets – cryptocurrency assets must be held in a wallet in the name of the SMSF and the IP address is provided to the SMSF auditors to verify the transactions (against the fund bank account). Problems often arise when a wallet (in the name of the SMSF) is connected to a personal credit card to acquire cryptocurrency. In these cases, the payment may be considered as either a contribution or a loan to the SMSF.

  • Sole purpose test - Your SMSF needs to meet the sole purpose test to be eligible for the tax concessions normally available to super funds. This means your fund needs to be maintained for the sole purpose of providing retirement benefits to your members, or to their dependants if a member dies before retirement.

 

About Author

Troy Furness

Troy is one of the Directors of Trekk and considers himself to be our 'Chief Ideas Person' - He has years of experience working in large firms, family businesses, and small practice. During this time experienced lots of successes, as well as some failures. He uses the lessons he's learned along the way to help his client's in any problem they are facing, as well as planning their road to success. The best piece of advice he's been given is "Work hard and the rewards will come, if you give up, then so will the rewards". But while he knows the value of hard work, he also understands the value of personal time too. So, you'll often find him settling in with a good movie with his family, having a punt with his friends or traveling to get some things ticked off the old bucket list in his spare time. If he's ever in need of an injection of motivation, you'll hear him blasting Hilltop Hoods or Eminem and he is hoping to compete in an Iron Man one day soon. A favourite family tradition is watching the Boxing Day Test with his son and if he ever finds the time to read he may pick up a James Patterson 'Alex Cross' novel.

Related Posts

Submit Your Comment

Subscribe our newsletter to get
latest news & updates

Lorem ipsum dolor sit amet consectetur adipiscing elit