Australians Warned Over Cryptocurrency-Heavy Self Managed Pensions

Bitcoinist August 17, 2019
Updated 2019/08/26 at 1:08 PM
4 Min Read

The Australian Tax office has sent out 18,000 warning letters to Self Managed Super Funds (SMSFs). The letters target those who have invested over 90% of retirement funds in a single asset class, such as property or cryptocurrency.

Breaking The Law with Cryptocurrency

The letters from the tax office remind SMSFs that they have a ‘duty to comply with legal requirements to adopt investment strategies avoiding risky investments’. Not only is such an investment strategy arguably riskier than diversification of assets, in Australia, it is against the law.

SMSFs involve individuals taking control of their own investment decisions when it comes to retirement funds, rather than relying on a professional fund manager. They are a major growth area for cryptocurrency businesses in Australia, representing around AUS$700 billion in assets.

Non-Compliant Funds Risk Fines… Or Scams

Those who do not follow the rules risk a AUS$4200 (US$2850) fine. Of course, if your crypto portfolio goes up then that may be worth breaking the rules for. Not that you heard it here.

Alternatively, if you chose to invest all your retirement savings in OneCoin, or PlusToken, or BitConnect, or [insert sh!tcoin of choice here]… then maybe not.

Well, let’s just say that you should be doing your due diligence on whatever you choose to invest in.

Clampdown Over Borrowing To Save

The clampdown on single-asset class SMSFs comes after a ten-fold increase in limited recourse borrowing arrangements (LRBAs). These involve an SMSF trustee taking out a loan to purchase a single asset to be held in a separate trust. If the trustee defaults on the loan, the lender only has rights to the asset purchased with the LRBA.

Over 40% of the SMSFs with LRBAs have 90% or more of the fund’s value concentrated in a single asset class. Most have invested the funds in a single property investment, but some put the lot into cryptocurrency.

Australia Makes Retirement Cryptocurrency Investing Easy

Australia has some of the most favourable laws worldwide regarding investing retirement funds into cryptocurrency. This was one of the reasons that Indian exchange, Zebpay opened an office there. CEO, Ajeet Khurana said:

Australia happens to be the only developed country where retirement money, superannuation money, can very easily be invested into cryptocurrencies.

The message on how much of your retirement funds can be put into crypto is not always clear though. According to the Bitcoin Australia website, “You can decide how much you would like to invest in crypto. This can be as little 1% or as much as 100% of your super – it’s completely up to you.”

Which is not an accurate representation of the law.

Would you include crypto in your pension fund? Let us know your thoughts in the comment section below!

Images via Shutterstock

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