The ATO has warned SMSF practitioners and trustees of the potential risks associated with cryptocurrency investments after observing an increase in cases where fund members have lost their digital assets due to circumstances outside of their control.
“Over the last few financial years we have seen some instances of SMSF trustees losing their crypto-asset investments. Many crypto assets are not commonly considered to be financial products. This means the platform where you buy and sell crypto may not be regulated by ASIC,” the regulator stated.
“You may not be protected if the platform fails or is hacked. When a crypto platform fails, you will most likely lose all of your crypto.”
The ATO identified specific situations contributing to these asset losses, including cryptocurrency scams where trustees had been persuaded by fraudsters to deposit superannuation funds into fake or non-existent cryptocurrency exchanges.
It also raised concerns about thefts, where hackers steal cryptocurrency assets from trustees’ accounts, in addition to the issues posed by unregulated cryptocurrency exchanges, exemplified by the recent collapse of large cryptocurrency exchange FTX.
The ATO has previously issued guidance on cryptocurrency investments, advising investors to seek professional advice from financial advisers and to maintain accurate ownership credentials and documentation for their digital assets.
In the event of lost or misplaced passwords, the regulator urged trustees to access the ‘lost access for my crypto’ resource on the ATO website, as they may be eligible to claim a capital loss in such situations.
It also directed trustees to its Moneysmart and SMSF investing in crypto assets webpages for additional guidance and advice on navigating the complexities of investing in digital assets.