Crypto investments are often speculative at best, and now the Australia Tax Office (ATO) has issued warnings to retirees about these high-risk investments. There are currently 18,000 retirees in Australia under the Self Managed Super Funds (SMSF) program. According to the ATO, 90% of these people are invested heavily into one asset class, with a focus on cryptocurrency-related assets.
Under the rules of the SMSF program, it’s illegal to invest everything into one asset class – a rule designed to protect investors from a crash on one specific asset class. Retirees investing all their money into cryptocurrency under the SMSF program could face a fine of up to $4,200 – not to mention the huge risk they face from the volatility in crypto markets.
Crypto Investments Can Go Very Wrong
Despite investing their entire portfolio into one asset, the ATO is also warning retirees of the dangers of cryptocurrency investments. During the 2017 ICO boom, people were taking out huge loans to invest in crypto. One Emirati took out a $140,000 loan and invested it into a number of coins. Come August 2018 he was already 85% down on his investment, leaving him no option but to declare bankruptcy. On the other side of the world, an American investor took out a huge loan and dumped it all into XRP. The loan is more than he can afford to pay back, meaning if XRP fails to rise he could be in a huge hole. It’s this that the ATO wants to stop from happening – a bad decision wiping out a person’s entire life savings.
Scams Are Rife in the Land Down Under
Aside from investing only in crypto being illegal and a bad idea for SMSFs, Australia is home to a lot of crypto scammers. In 2018 alone, scammers took home $4.3 million from unsuspecting individuals. Con artists in Australia often pose as brokers, offering victims too good to be true crypto exposure. However, as one retired couple recently found it, if it sounds too good to be true, it’s usually a scam. The couple lost their entire $900,000 pension pot to the scammers, a key reason behind the ATO pointing out the dangers of crypto investments.
Retirees investing under the SMSF program need to be careful when picking their investment portfolios, diversifying across multiple asset classes to hedge risks. While crypto might offer a huge potential return, it also holds a significant amount of risk – one that’s not worth the fines involved.