News

No TBAR obligations from LRBAs

Cryptocurrency still an investment

By Darin Tyson-Chan

A technical specialist has advised it is highly unlikely for any transactions involving a limited recourse borrowing arrangement (LRBA) to have the ability to trigger the need to lodge a transfer balance account report.

“In order to have a situation where [an LRBA transaction] is a TBA (transfer balance account) event, where it would be a credit towards the member’s transfer balance account, you’ve got to have a fund which has an LRBA, so an asset under a borrowing arrangement that would have to be segregated,” Accurium head of education Mark Ellem said.

“So that rules out all of the funds that have disregarded small fund assets and all the funds that haven’t elected to use segregation.”

Further, Ellem noted the asset would have to be segregated to the member’s pension account.

“From a tax viewpoint, why would you do that, because if you segregated to the pension side you’re not going to get a tax deduction for the interest on the loan? [Instead] you would segregate it to the accumulation side [of the fund],” he noted.

“What [the ATO is] concerned about is [if] you’ve got an LRBA asset segregated to the pension side of the fund, but you’re taking the money from the accumulation side to repay the loan and therefore the net asset is going up by the amount of the loan repayment.

“The other issue there is you’re taking money from the accumulation side,

Mark Ellem which actually means you wouldn’t be complying with [Superannuation Industry (Supervision)] reg 5.02 or 5.03 [as to] making sure that costs and earnings are allocated on a fair and reasonable basis because effectively the accumulation member would be paying all of the loan repayment.”

He pointed out he can understand why practitioners and trustees would be concerned about this situation in theory, but admitted he has yet to see an issue like this in practice and is unlikely to in the future.

“Look, be aware of it, but I’m yet to see one,” he advised.

By Darin Tyson-Chan

Cryptocurrency currently continues to be classified as an investment with regard to SMSFs, meaning its use is limited from a strategic perspective, a technical expert has said.

“Cryptocurrency from a superannuation point of view is not currency – it is an investment. So we cannot make a contribution to super via cryptocurrency,” SuperGuardian education manager Tim Miller told delegates at a recent practitioners’ workshop he hosted in Sydney.

However, Miller predicted this situation is likely to change some time in the future when the associated systems increase their use in conventional transactions.

“There has to be some point in time in the future where we all eventually accept blockchain technology and cryptocurrencies because some of us will actually start to understand it, and so the capacity to contribute and the definition of cash will expand when governments recognise cryptocurrencies as a means of exchange rather than as an investment,” he noted.

According to Miller, the role cryptocurrency will eventually be allowed to play in the retirement savings arena, and how quickly any change to the framework will come, is all dependent on the actions of the regulator.

“We’re going to be in this real regulatory oddity over the next few years I think because we have to wait for [our] regulators to catch up with the rest of the world and [the relevant] technologies,” he added.

“But right now, what I can tell you is you cannot contribute to super via cryptocurrency. You can invest in it, but you can’t contribute via it,” he confirmed.

The ATO is already being asked about the role cryptocurrency can play in employment agreements. Opportunities still possible outside of contributions.

For example, it has confirmed individuals can receive cryptocurrency instead of Australian dollars as part of a valid salary sacrifice arrangement. The only condition the ATO has placed on these types of transactions is that the payment of cryptocurrency to an employee be treated as a fringe benefit, meaning the employer will be subject to the provisions of the Fringe Benefits Tax Assessment Act 1986 in these situations.