This month we will look into the crypto-currency or bitcoin revolution and if is the right choice for superannuation investment.
Cheers
Justin
So what is bitcoin? The Oxford Dictionary defines bitcoin as “a type of digital currency in which encryption techniques are used to regulate the generation of units of currency and verify the transfer of funds, operating independently of a central bank”. Confused? Can you see banks of the world letting an alternative form of currency taking control of their domain?
I recently attended a conference where they discussed the bitcoin and how it’s becoming part of society. For interests sake, there are more transactions being done on bitcoin in value terms than other transactions. If it hasn’t overtaken paypal, it’s getting very close.
One of the companies presenting at this conference talked about their bitcoin business and it’s this and it’s that. Then proceeded to tell us the government has just suspended it’s trading until further notice. Not a positive look for the bitcoin industry. ASIC last month made an announcement expressing concern at SMSF trustees “throwing money into bitcoin”.
From a taxation perspective, the ATO has issued a number of draft determinations in relation to bitcoin. Specifically they say, from a taxation perspective:-
• Bitcoin isn’t money
• Bitcoin isn’t a foreign currency
• Bitcoin is property and subject to CGT
• No comments yet from a SIS compliance
The ATO takes a dim view of investments such as motor vehicles, gold bullion and paintings. Purchasing bitcoin as an investment may just get you to the top of the ATO’s audit list for certain. They will be attacking the sole purpose and separation of assets area of the legislation.
The ATO also don’t like derivatives in SMSF and add the extra requirement for a derivative statement and risk management document – imagine requirements on a digital non-currency currency!
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