SMSF Investments in Digital Assets: Navigating the Nuances
The rules governing SMSF investments in digital assets are straightforward yet nuanced. Super law does not maintain an approved list of tokens, and therefore applies its core trustee rules to every digital asset. This means that altcoins, stablecoins, NFTs, and DeFi protocols can all be held by an SMSF, provided the trust deed allows it and the investment strategy covers it.
However, each type of token brings distinct tax, liquidity, and compliance questions. For instance, staking tokens may trigger additional tax obligations, while borrowing against tokens via DeFi protocols breaches the general borrowing prohibition.
The ATO treats crypto assets as capital gains tax (CGT) assets for SMSFs, and therefore requires trustees to report them at market value each year with objective evidence for the auditor. The trust deed must permit the investment, and the written investment strategy must consider it, including its risk, liquidity, and diversification.
Related parties are also a concern, as crypto assets cannot be acquired from members or relatives, even at market value. Any dealing with related parties must be at arm's length, and income from non-arm's length arrangements can be taxed at the top marginal rate.