Once you have purchased cryptocurrency through an Australian based exchange, in the name of your SMSF, it is permitted that the cryptocurrency is transferred from the Australian based exchange to a private hardware wallet. Examples of private hardware wallets include the “Ledger Nano” and “Trezor” hardware wallets. However, notwithstanding that this is allowed, please note the following important considerations in relation to the compliance and audit obligations for your SMSF.
Initial Cryptocurrency Purchase
When acquiring cryptocurrency for your SMSF, the cryptocurrency should be initially purchased via an Australian based exchange in the name of your SMSF. Clients of ESUPERFUND are permitted to use any Australian based cryptocurrency exchange to purchase cryptocurrency for their SMSF.
Establishing SMSF Ownership
When you initially purchase cryptocurrency through an Australian based exchange, in the name of your SMSF, it is permitted that the cryptocurrency is then transferred to a private hardware wallet as detailed above. This process will provide an audit trail evidencing that the cryptocurrency has been purchased by your SMSF. If initially the cryptocurrency is not acquired via an Australian based exchange and is acquired via alternative means (eg via a transfer from a private wallet) an audit trail is not available to evidence that the cryptocurrency has been purchased in the SMSF name. This will cause audit issues at financial year end.
Resolving Audit Issues
One compliance challenge when using a private hardware wallet to store cryptocurrency owned by your SMSF, is that the hardware wallet does not have the SMSF title on it. This is issue is resolved by ensuring that the cryptocurrency is initially purchased via an Australian based exchange and then transferred to a hardware wallet. By following this process, ESUPERFUND will be able to establish an audit trail confirming that the cryptocurrency was initially purchased by the SMSF.
Auditing Cryptocurrency Owned in a Hardware Wallet
At financial year end, as part of the audit purchase ESUPERFUND will prompt you to sign a document confirming that the hardware wallet is owned by your SMSF, the amount of cryptocurrency stored on that hardware wallet and all cryptocurrency stored on that hardware wallet is held by the SMSF.
Ownership and Separation of Assets
Superannuation laws require trustees and members to ensure their fund’s assets are held separately from personal assets. An SMSF’s cryptocurrency investments must be held and managed separately from the personal or business investments of the trustees and members. This includes ensuring the SMSF has clear ownership of the cryptocurrency. This means the fund must maintain and be able to provide evidence of a separate cryptocurrency wallet for the SMSF from that used by trustees and members personally. Accordingly, it is important that only cryptocurrency owned by your SMSF is stored on a hardware wallet and that cryptocurrency owned personally by the trustee personally is stored on another hardware wallet. The hardware wallet should not “mix” cryptocurrency owned by the SMSF and cryptocurrency owned by the trustee personally.
Acquisition of Cryptocurrency from Related Party
As detailed above, you are not permitted to transfer cryptocurrency owned by the trustee personally to the SMSF. This is specially disallowed under superannuation law. Cryptocurrency must be initially purchased by your SMSF through an Australian based exchange in the name of your SMSF. You then have the option to transfer the cryptocurrency to a hardware wallet as detailed above.
No financial product advice or recommendation
No Advice Express or Implied: It is important to understand that ESUPERFUND has not taken into account any particular investor's objectives, financial situation or particular needs. ESUPERFUND does not provide financial product advice or recommend any financial products either expressly or implied. ESUPERFUND expressly states that it does not recommend, represent as suitable, or endorse any financial product or service available through ESUPERFUND.