SMSF trustees must follow the established rules and obligations outlined in superannuation legislation when investing in digital assets, even though these assets are relatively new to the financial landscape, according to a technical expert.
BT Financial Group advice strategy and technical specialist Tim Howard said despite increasing interest in digital assets, such as cryptocurrency and non-fungible tokens (NFT), an SMSF acquiring these assets must adhere to the provisions contained in the Superannuation Industry (Supervision) (SIS) Act and ensure the investment strategy and trust deed permit such investments.
“From an investment strategy point of view, what you need to do is look at [digital assets] like any other investment. It’s simple in the sense that we can’t acquire any of these exotic assets from a related party because they won’t meet any of the exemptions set out in section 66 of the SIS Act,” Howard told attendees at a technical webinar he hosted yesterday.
“You need to evidence that any of these unique assets have been acquired for the sole purpose of providing retirement benefits for fund members. You also need to make sure that it doesn’t meet the collectable or personal-use asset definition, because if it does, it’s got another set of regulatory requirements within SIS Regulation 13.18AA.
“Like any other investment, we can’t get any present-day benefit or personal use out of the asset if the SMSF acquires it. So any of the NFTs that the SMSF might hold and the member uses them in online gaming, that’s going to be an issue.”
Conversely, he confirmed demonstrating ownership of an asset stored on a blockchain ledger was a more complex undertaking as trustees would be expected to furnish proof through a cryptocurrency wallet or digital certificate of ownership.
He also advised trustees to follow ATO guidance when determining a digital asset’s fair market value, which entails obtaining a valuation from a reputable digital currency exchange or providing a publicly available rate on an established website.
“If you can meet all those requirements, if you can show the SMSF holds the asset in its own title, if you can show that the asset is in line with the retirement objectives of the member, if you’re not getting any present-day benefit out of it, then there would be nothing preventing you from investing in such assets,” he said.