Bitcoin and other cryptocurrencies have become increasingly popular over the past few years. As many keen investors jump on board, the ATO is reminding SMSFs to be aware of the tax consequences.
Cryptocurrencies are classified as capital gains tax (CGT) assets, therefore, upon their disposal they may be subject to capital gains tax (CGT).
It is essential to keep records of cryptocurrency transactions within a SMSF such as acquiring and disposing a cryptocurrency.
An investment within a SMSF must:
– Be allowed under the trust deed
– Be in accordance with the investment strategy of the fund
– Comply with SISA and SISR regulatory requirements
When an SMSF invests in a cryptocurrency it must follow the same regulatory requirements that apply to investments in other assets. For example, super laws pertaining valuation, ownership and separation of assets, related party transactions, pension or benefit payments, sole-purpose test and voluntary disclosures apply to all cryptocurrency transactions.
A super death benefit is the super paid after a person’s death, usually to a nominated beneficiary. These benefits are subject to different tax treatments, depending on whether the beneficiaries are dependant or non-dependant.
Superannuation death benefits will generally be received tax-free by tax dependants, who are considered to be:
A child of the deceased who is under 18 years of age,
A spouse or former spouse of the deceased,
A person who has an interdependency relationship with the deceased (e.g. if they live together or have a close personal relationship),
A financial dependant of the deceased.
Dependants will not have to pay tax on the tax-free component of their super in the event that they:
Withdraw it as a lump sum, or
Receive an account based income stream.
However, they will be taxed at their marginal rate if they receive a capped benefit income stream and:
The deceased was at least 60 years of age at the time of death
The dependent is over 60 years of age and the total of their tax-free component and taxed element exceeds their defined benefit income cap.
Not all super death benefits are subject to tax; for non-dependants, there is a taxable portion. This component is largely made up of after-tax super contributions that the deceased member has made.
Super death benefit payments are subject to tax when:
The payment is made as a result of the SMSF member passing away,
The payment is provided to a non-dependent for tax purposes,
The payment has a taxable component.
Non-dependants must calculate how much money in the super account is a:
Tax-free component,
Taxable component the super provider has paid tax on (taxed element),
Taxable component the super provider has not paid tax on (untaxed element).
The amount of tax non-dependants pay will be based on their marginal tax rate, however, this amount may be reduced by tax offsets. For the taxed element of the taxable component, the effective tax rate is your marginal tax rate of 17% (whichever is lower). For the untaxed element of the taxable component, the effective tax rate is 32% or your marginal tax rate (whichever is lower).
