Your Scenario:

You own classes of Bitcoin and Ethereum personally and wish to transfer these crypto currencies into your SMSF’s legal holding structure.

Question:

Is it an allowable transfer under the SIS Act?

Answer:

No, Section 66 of SIS Act prohibits an SMSF trustee from acquiring an asset from a related party of the fund. An exemption in Section 66(2)(a) exists for listed securities acquired at market value but does not include cryptocurrency.

While ‘acquiring an asset” does not include accepting money, the ATO does not consider crypto to be money or fiat currency.

As a result, the fund cannot accept crypto via a contribution or from a related party transfer, as this breaches the acquisition of asset rules from a member or related party.

Tax Tip:

While the risks of trading crypto are mainly related to price volatility, it is considered a high-risk and speculative investment that is subject to changes in market sentiment. As an unregulated market, there are questions about the susceptibility of error and hacking with little possibility of preventing technical glitches or human error.

High-risk investments are possible within an SMSF, but trustees need to understand the risks and make sure the correct documentation is in place.

Unless they are a professional, however, it will be difficult to make reasonable returns.

The high-risk and volatile nature of crypto will not stop SMSF trustees from investing in them. SMSF trustees, therefore, should carefully consider whether having crypto in an SMSF creates the perfect SMSF storm.

Common Traps:

The key question is actually is this an appropriate investment for an SMSF and does it pass the sole purpose test?

Of course, an SMSF trustee can invest in any asset allowed under SIS as long as it is a permitted acquirable asset. The investment must:

• Be allowed for under the fund’s trust deed
• Be in accordance with the fund’s investment strategy
• Comply with SISA and SISR regulatory requirements concerning investment restrictions.

Disclaimer

GW Capital Group Pvt Ltd General Advice Warning: This advice may not be suitable to you because it contains general advice that has not been tailored to your personal circumstances. please seek personal advice prior to acting on this information.