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.
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.