Highlights

  • Crypto assets must be held in a wallet in the fund's name to satisfy SMSF ownership and custody requirements.
  • Holding statements alone are insufficient evidence of ownership; exchange valuations at 30 June with historical data are required.
  • Absence of a Type 2 controls report from the exchange is likely to result in a Part A qualification on the audit report.
  • Crypto assets are not listed securities, so SMSF trustees may acquire them from a related party without breaching in-house asset rules.

Cryptocurrency in SMSFs raises a distinct set of audit challenges that differ from those applying to listed shares or real property. Jacob Kewley of Tactical Super outlined the key audit considerations at Auditors Day, covering wallet custody, valuation evidence, and the consequences of missing controls documentation.

Wallet Custody Requirements

For an SMSF to properly hold cryptocurrency, the assets must be stored in a wallet that is in the name of the fund. This requirement flows from the general obligation that fund assets must be clearly identifiable as belonging to the SMSF and kept separate from the personal assets of trustees and members. A wallet held in a trustee's personal name does not satisfy this requirement even if the trustee treats it as belonging to the fund.

Holding statements printed from an exchange account are not sufficient evidence of ownership on their own. Auditors require valuation evidence from the exchange that shows the 30 June balance with historical price data to support the closing value recorded in the fund's financial statements.

Part A Qualification Risk

Part A of the SMSF audit report covers financial compliance, while Part B covers regulatory compliance. These are separate decisions with separate consequences. If an exchange does not provide a Type 2 controls report, the auditor cannot obtain sufficient assurance over the completeness and accuracy of the financial data from that platform.

In the absence of a Type 2 controls report from the cryptocurrency exchange, the audit is likely to result in a Part A qualification. A qualified Part A opinion indicates that the auditor could not obtain sufficient evidence to form an unqualified view on the fund's financial statements for the crypto holdings in question.

Acquisition From a Related Party

Cryptocurrency is not classified as a listed security under the SIS Act. This classification matters because the in-house asset rules and the prohibition on acquiring assets from related parties operate differently for listed securities compared with other asset classes. Because crypto does not fall within the listed securities category, an SMSF can acquire cryptocurrency from a related party without breaching the acquisition restriction that applies to listed investments.