A panel of specialist practitioners has alerted SMSF trustees to the compliance challenges holding cryptocurrency within an SMSF can potentially present.
According to Accountants IQ founder Bronwyn Speed, the issue has gained significance since the ATO reported cryptocurrency as a separate asset class in its most recent SMSF statistical data.
“If crypto is now a new asset category, how is it being related back to investment strategies?” Speed asked during a question and answer session at the Chartered Accountants Australia and New Zealand SMSF Conference 2021.
“It actually brings up some very significant issues, [such as whether it is] a separate asset class,” she added.
To this end one of the main challenges Speed identified is determining whether cryptocurrency is a growth or a defensive asset and as such defining the role it will play in the investment strategy of the fund.
Fellow panellist BDO Australia superannuation partner Shirley Schaefer said SMSF holdings in cryptocurrency could pose even more compliance issues at a fundamental level for trustees.
“One of the main issues is being able to prove ownership or existence [of the asset] for that matter. All of this [is done through] an online platform [from which] you may be able to print reports, but there may not be statements issued or anything like that,” Schaefer noted.
“There are no custodial arrangements in place that you would see for other [assets] so really the existence and the ownership issues are the big ones.”
On a more positive note, she acknowledged the valuation was one aspect that is not problematic with SMSF cryptocurrency investments.
“Valuations are fairly straightforward. You can get your own prices off websites, so that’s easy,” she said.
She reiterated Speed’s concerns regarding the challenges cryptocurrencies present for SMSF investment strategies.
“Because of the characteristics of the investment, whether you believe it’s risky or not is probably a personal thing, but it’s certainly volatile and those sorts of issues need to be addressed,” she said.''