Compliance issues when you invest in bitcoin through SMSF

Facebook Twitter LinkedIn Mail Us

With the recent interest and price surge of bitcoin, SMSF auditors have warned SMSF investors about certain compliance traps and potential breaches they should consider. Auditors have not seen plenty of SMSFs investing in the cryptocurrency before so this is relatively new to them as well.

One issue with bitcoin is the ownership. It is difficult to confirm the actual owner of the bitcoin, making it also difficult to separate the assets of the individual and the super fund because of how bitcoin and blockchain ledgers work. The assets are often linked to personal credit cards so it can be risky audit-wise.

To buy bitcoin, investors need a bitcoin wallet, which is a software program offered by various providers. It’s like a bank account but if you invest in bitcoin in an SMSF, the wallet won’t have the SMSF title on it. Bitcoin is pseudonymous while SMSF compliance is about title and ownership.

People can also have several wallets and a new address per transaction so an audit trail can get pretty messy. SMSF investments should be clearly identifiable as being owned by the SMSF and separate from assets held by the trustees in their personal capacity. An individual’s wallet should be separate from a wallet dedicated to the SMSF or else it will be a breach of separation of assets.

Bitcoin can’t be used as an in-specie contribution as well. The SMSF cannot buy bitcoin from its members because it is not a listed security or a commercial property. Bitcoin has to be purchased with cash in the fund from an unrelated party.

It is advisable that SMSF clients update their investment strategy if they want to purchase bitcoin as it is highly volatile based on historical pricing. Bitcoin may not fall into any existing asset class in the investment strategy because it is not cash and does not have a physical form. It is a right and should be added as a separate asset class. SMSF clients should check the trust deed to make sure it doesn’t prevent the trustee investing in bitcoin.

What can you do?

If you would like to know more about SMSF and bitcoin investment, you can click here to know more about Chan & Naylor services. You can leave your details here and we can schedule you for a free consultation. We’ll contact you to explain more.

Whether you are a beginner, seasoned investor or business owner, we can give you guidance to maximise the financial areas of your life. We can give you an integrated and tailored solution of your superannuation, taxation, property investment, asset protection, estate planning and more.

Click here to schedule a chat or call any of our local offices near you.

If you like what you are reading, subscribe to our newsletters now at www.chan-naylor.com.au or follow our Facebook page: https://www.facebook.com/chanandnayloraustralia

Chan & Naylor Group has nationwide offices in Brisbane and Capalaba in Queensland, Melbourne and Moonee Ponds in Victoria, East Perth in Western Australia, and South West Sydney, Parramatta, Pymble, North Sydney, and Sydney in New South Wales.

To view the original article, click here

Photo: Flickr

Disclaimer

 

 
 
 
 

Warning

The material on this website has been prepared for general information purposes only and not as specific advice to any particular person. Any advice contained on this website is General Advice and does not take into account any person’s particular investment objectives, financial situation and particular needs. Before making an investment decision based on this advice you should consider, with or without the assistance of a securities adviser, whether it is appropriate to your particular investment needs, objectives and financial circumstances. In addition, the examples provided on this website are provided for illustrative purposes only.

Although every effort has been made to verify the accuracy of the information contained on this website, lnfocus, its officers, representatives, employees and agents disclaim all liability [except for any liability which by law cannot be excluded), for any error, inaccuracy in, or omission from the information contained in this website or any loss or damage suffered by any person directly or indirectly through relying on this information.

Leave a Reply

Your email address will not be published. Required fields are marked *

Join our mailing list today!

Keep up to date with our latest news & updates!