The younger generation is establishing an increasing number of self-managed superannuation funds as an alternative to retirement funds. Perhaps one of the most lucrative investments is cryptocurrency. The most important thing is that you must do your research and must meet the important regulatory rules and investment-related compliances required to set up a self-directed super fund. There are a few important things that you must Know About Self managed super cryptocurrency Investments:
- The Sole Purpose Test- With any investment your SMSF undertakes, including cryptocurrency investments, you must ensure that it passes the sole purpose test. This entails ensuring that the investment is made solely for retirement benefits for its members. The other consideration is that the trustee must keep the SMSFs crypto assets separate from a member’s assets. So, if members invest in cryptocurrency, they must have a separate digital wallet from the fund members’ wallets.
- SMSF Auditors Need Identify Trading History- The SMSF auditors must identify that the auditors can have a trading history for the SMSFs crypto wallet. Virtual wallets are uniquely identifiable and do not contain the actual transactions. SMSF trustees need to set up a bank account, so the auditor can easily trace payments and match up the transactions. This way, the auditor can verify that the transactions were solely made for the benefit of the fund.
- SMSFs Cannot Take Cryptocurrency from Trustees- Based on the rules, the SMSFs can’t acquire any assets from related parties and trustees and companies or unit trusts controlled by members or trustees. Related parties are not permitted to sell or gift their crypto investments to the SMSF, and the funds can only be acquired from unrelated third parties.
- Annual Valuation Requirements- Based on the regulations for self-managed super funds, all assets held by the fund must be regularly valued to calculate the current market value. The process is quite trickier when the cryptocurrency is involved, as the value of digital currencies changes significantly daily. So, the ATO has asked the SMSF trustee to ensure that the cryptocurrency is valued on 30 June each year according to a reputable digital currency exchange annually.
Undoubtedly, the cryptocurrency investment space is growing exponentially, and the ATO is clamping down on the rules, regulations, and tax obligations surrounding these investments. For seamless investment, you may consider New Venture Health, a leading accounting and financial advisory firm providing tax advice and planning to SMSFs and cryptocurrency investors. We have extensive experience helping business owners navigate their personal or business investments.