A panel of specialist practitioners has alerted trustees and advisers to the compliance challenges holding cryptocurrencies 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 yesterday.
“It actually brings up some very significant issues, [such as whether it is] a separate asset class. Is it a product is the next issue, so therefore does it come under the advice framework. If it does, how are advisers going to delineate what type of asset it is and whether it is defensive or whether it’s a growth asset from an asset allocation perspective and how does that match up against [a client’s] risk profile.”
Further, she pointed out if cryptocurrencies are to be considered a product, then advisers need to be cognisant of whether they are included on their licensee’s approved product list before discussing an allocation to them with clients.
Fellow panellist BDO Australia superannuation partner Shirley Schaefer said SMSF holdings in cryptocurrency could pose even more 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.
