Putting all the pensions in one basket is not only risky, but also illegal, as 18,000 Australians will soon find this.
The Australian Taxation Office (ATO) has begun warnings to 18,000 self-managed funds (SMSFs) that invest more than 90% of their retirement funds in a single asset class, such as real estate or cryptocurrency.
SMSFs refer to individuals who control their retirement fund investment decisions rather than handing over the management of the funds to professionals.
The total assets involved in SMSFs are approximately $700 billion, which is a major growth area for the Australian cryptocurrency business.
ATO warned in the letter that SMSFs have “obligation to comply with legal requirements and adopt an investment strategy to avoid venture capital”.
Retired people who violate the rules will face a fine of up to $4,200.
A spokesman for ATO said:
“We have seen examples of two SMSFs losing a lot of retirement savings by investing in cryptocurrencies.”
ATO Assistant Commissioner Dana Fleming said the letters were intended to remind the SMSF owners of "their legal obligations" and "remind them to potential concentration risks and regulatory issues."
In Australia, one-fifth of the SMSFs are currently operated by people under the age of 45, while established exchanges such as CoinSpot and Independent Reserve provide such services directly to SMSFs.
It is reported that the Indian exchange Zebpay was attracted to Australia, in part because of the country's law of investment in cryptocurrency.
Zebpay CEO Ajeet Khurana said:
“Australia happens to be the only developed country that can invest in retirement funds in cryptocurrencies.”
And some service providers even told the SMSF holders:
"You can decide the percentage of pension funds that invest in cryptocurrencies, which can be 1% or 100% – entirely up to you."
This is both a bad investment advice and not correct.
In addition, the Australian Securities and Investments Commission (ASIC) and the ATO have all raised warnings about the investment risk of cryptocurrencies.
“Be wary of SMSF services that offer cryptocurrency investments. Operating SMSF requires not only a lot of time, capacity and responsibility, but also your retirement savings.”
“We strongly recommend that all trustees conduct appropriate due diligence before investing in any cryptocurrency assets.”