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The Tax Office is seeing instances of funds reporting losses with crypto investments due to scams and collapsed trading platforms.
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ATO issues alert to SMSFs on crypto scams and losses
25 April 2024
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The ATO has warned SMSF trustees thinking about investing in crypto on some of the ways crypto can be lost with the Tax Office seeing increased reports of losses.
“We continue to see SMSF trustees reporting losses with crypto investments due to scams and other reasons,” the ATO said in a recent update.
Some of these crypto investment losses have been caused by scams, where trustees were conned into investing their superannuation benefits in a fake crypto exchange.
In other cases, the ATO said the losses are due to theft, where fraudsters have hacked into trustees’ crypto accounts to steal all their crypto.
“[Some trustees have also] lost passwords resulting in them being locked out of their crypto account and unable to access their crypto,” the Tax Office said.
The ATO is also seeing instances of scammers pretending to be from the ATO, telling people they are suspected of being involved in cryptocurrency tax evasion.
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“The ACCC’s Scamwatch and the MoneySmart section on ASIC’s website have useful information on how to spot scams and what to do if you’ve been targeted,” it said.
“Many crypto assets are not considered to be financial products. This means the platform where you buy and sell crypto is usually not regulated so you may not be protected if the platform fails or is hacked and you could lose all of your crypto.”
ATO Assistant Commissioner Tim Loh previously explained that in cases where the trustee has lost access to the crypto it may be possible to claim a capital loss.
“You may be able to claim a capital loss if you lose your crypto private key or your crypto is stolen. To claim a capital loss, you must be able to provide evidence [such as] when you acquired and lost the private key, the wallet address that the private key relates to, the cost incurred to acquire the lost or stolen crypto, the amount of crypto in the wallet at the time of the loss, that the wallet was controlled by you,” said Loh.
“For example, transactions linked to your identity, that you have the hardware that stores the wallet or transactions of the wallet from a digital currency exchange that you hold a verified account for is linked to your identity.”
The Tax Office said that investing in crypto can be complex and risky and it recommends trustees seek financial advice before investing and read both MoneySmart and the ATO’s SMSF investing in crypto assets page.
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