“You can borrow to acquire any unit or any type of asset [through an LRBA] that you’re ordinarily allowed to buy so equally you could borrow to buy crypto or digital assets. You’d be very brave too, but you can,” explained Mr Broderick.

“You would then just have to follow the normal rules that apply.”

One of the first rules to consider, he said, is that an SMSF can only borrow to acquire a single acquirable asset.

“Now with cryptocurrencies, you’re probably going to buy a number of coins or part interests in coins. However, we do have that exception there that you can buy a collection of assets, as long as they’re effectively the same and for the same price.”

“So, you couldn’t, for example, borrow to acquire a collection of NFTs through one LRBA. You’d have to have one LRBA for each NFT asset.”

One of the other issues is going to be finding a lender, he noted.

“If we are able to find unrelated lender then all those arm’s length dealing issues drop away. [However], I would challenge you to go out and find an unrelated lender that would lend on digital currencies. So for most people, it’s going to be a related party lender.”

“We’ve then got to deal with the rules around non-arm’s length income and expenditure.”

The safe harbours in PCG 2016/5 only apply to real estate and shares, meaning they won’t be of help here, he noted.

“Certainly, what I know from dealing with the ATO is that once you’re outside of the safe harbours they certainly want you to supply that benchmark material.”

“They’re very focused on seeing evidence these days on what an unrelated lender would lend on and if you don’t provide that benchmarking then you basically haven’t met your burden of proof in their eyes.”

If the SMSF trustee can’t find those benchmarking materials and relies on something that looks “commercial enough”, Mr Broderick warned they may be putting themselves at a big risk of an ATO review and a potential non-arm’s length income assessment.