Are you planning to invest in cryptocurrency? In its recent announcement, the Australian Taxation Office (ATO) urges all self-managed super fund (SMSF) trustees who are considering investing in cryptocurrency assets to get expert advice from a certified financial adviser. There are several companies that assist trustees in creating or using funds they already have to invest in crypto assets.

Before choosing to invest in crypto assets, there are a lot of factors to consider so as to make sure the investment conforms with any tax and super regulations. The two standpoints or perspectives need to be kept in mind while making an investment.

From a regulatory perspective, it’s crucial that:

• The fund is the owner of the cryptocurrency assets, which are kept apart from investor’s personal and business assets.
• The investment is valued at market value in accordance with the valuation criteria formulated by the ATO.
• The fund must have its own digital wallet that is distinct from any used by an investor for personal or professional purposes.
• The investment complies with a specific purpose and does not include providing financial aid to a member.
• Any cryptocurrency asset that a member or associated party individually owns is not sold or transferred to the fund as a contribution.

From a tax perspective, it’s important for an investor to know that:

• The tax obligations associated with buying, selling, or investing in crypto assets must be done on an arm’s length basis
• The income tax implications of typical transactions associated with crypto assets
• The capital gains tax (CGT) ramifications associated with selling crypto assets
• The capital gain or loss after disposing of an asset must be reported on the SMSF tax return
• Income related to any crypto assets you own, such as staking rewards, must be disclosed on the return

Remember that when investing in crypto assets, you must ensure that it is permitted under the fund’s trust deed, that it is made in accordance with the fund’s investment strategy, and that you have considered the level of investment risk given the investment’s high volatility. For more information, you can talk to our tax accountants at KPG Taxation.