A guide to investing in Bitcoin with your Self Managed Super Fund (SMSF)
This article is a quick guide aimed at Australian’s who are looking to invest in cryptocurrency via their Self Managed Super Fund (SMSF). Through the.
This article is a quick guide aimed at Australian’s who are looking to invest in cryptocurrency via their Self Managed Super Fund (SMSF).
Through the flexibility of a Self Managed Super Fund Australian’s now have the ability to diversify their assets into a number of classes. As part of a balanced investment strategy, many fund managers have decided to gain exposure to digital assets such as Bitcoin, due to its future potential and historical significant gains.
Note: In this article we use the words ‘cryptocurrency’, ‘digital currency’ and ‘digital assets’ interchangeably.
What is a Self Managed Super Fund?
A Self Managed Super Fund (SMSF) is a fund set up by an individual (or group) to manage their funds manually through a Trust Deed. The advantage of an SMSF is you have full control over the management of your retirement investments, whilst having the ability and flexibility to make changes easily and control fees.
Can I invest my SMSF funds into cryptocurrency?
Yes. Cryptocurrency such as Bitcoin is a legitimate investment option recognised by the Australian Government through the Australian Tax Office. As with all investments, cryptocurrency transactions are subject to taxation law, which is outlined, alongside other useful information on the ATO site here.
To invest your super into cryptocurrency (or other assets) you must first setup an SMSF. This will likely require the assistance of a registered Accountant for planning, advice and operating statements, a legal practitioner to create the Trust Deed and the appointment of an approved SMSF auditor when it is time to lodge a tax return. In addition to this you may choose to seek the assistance of a fund administrator or financial adviser to keep on top of the administration required.
What is required to invest in cryptocurrency with my established SMSF?
Here at Easy Crypto, we have helped many Australian’s invest their cryptocurrency into digital currencies such as Bitcoin. As with other financial institutions, Digital Currency Exchanges (such as Easy Crypto) are subject to regulatory oversight and that requires us to complete due diligence (KYC or ‘Know Your Customer) on the owner/s of the SMSF. This is a relatively straight forward process and involves us collecting and verifying some basic information as follows:
- Beneficial Owner/s Name/s
- Beneficial Owner/s DOB/s
- Beneficial Owner/s Address/es
- Proof of Trust ACN or ABN
- Proof of Trust Structure (Beneficial Owner proof)
- Proof of Trust Deed
- Proof of Trust Name and Address
Beneficial owner(s) must be over the age of 18 years and an Australian Resident(s). In simple terms a beneficial owner is the individual(s) who directly or indirectly own or control the accounts wealth.
The above information can be collected and verified in a number of ways and the team at Easy Crypto can help you from start to finish.
What should I be aware of when investing SMSF funds into cryptocurrency?
We must begin this section with a caveat, Easy Crypto cannot give you tax advice around your investment, it is highly recommended you speak to a registered Accountant to ensure you are covered in this area. However, we have compiled some general information from the Superannuation Industry (Supervision) Act 1993 (SISA) around SMSF funds and digital currency:
Section 62 – Sole purpose test – neither disallows or allows specific investment in crypto currency. The extent of this section is to ensure that people are investing in assets suited for their retirement taking into consideration the needs of all members and their risk appetite and their circumstances and to further ensure that death benefits are maintained for members and their next of kin.
Section 66 – related party transactions – where crypto currency is concerned no purchases are allowed from persons related to the smsf members, although there are exceptions for which advice must be sought.
Section 71 – in house assets – 5% allocation into in-house assets is permitted, which is assessed annually at tax time.
Section 109 – arm’s length provisions – assets are acquired and disposed of at commercial rates and terms without any benefit or personal or present day benefit to members of the fund.
Section 13.18aa – details the allowed collectable assets in an SMSF.
The key considerations are the audit requirements to ensure that bitcoin and crypto currencies are:
- Valued annually, transaction receipts are provided.
- Confirm the holding address of assets, which need to be offsite from a members abode and secured safely so there is no personal benefit from the asset.
- It is not a requirement to insure crypto currency, as it is not a physical asset or a collectable as defined in section 62a SISA.
source – mysmsf
Why should I invest in Bitcoin with my SMSF?
Bitcoin and other cryptocurrencies are considered a good alternative hedge against, or to complement traditional financial investments. Bitcoin has a history of strong growth since its launch and is now considered a mainstream investment, with a market cap of over 100 Billion USD at the time of writing.
Due to having this established market, Bitcoin is also a very liquid asset, with many exchanges (such as Easy Crypto) worldwide having the ability to convert Bitcoin (BTC) back into fiat (AUD) at the touch of a button.
Other considerations when buying digital currency for my SMSF?
It is important that you understand the storage and security of your digital asset prior to purchasing. There are two reasons for this, the first being that the law requires you to store cryptocurrency in a specific way (have a specified holding address of assets, which need to be offsite from a members abode and secured safely so there is no personal benefit from the asset – storage in a hardware wallet is most suitable).
Secondly, a fund manager must be competent in storing cryptocurrency, having a backup for that storage and, be versed in ensuring they are aware and follow strong online and IT security principles.
Easy Crypto can assist SMSF fund managers in understanding and navigating the world of Bitcoin wallets and associated security risks and concerns. This requires no special skill on the part of a manager, just an awareness and understanding of the risks, as well as practicing of correct password and storage techniques (along with backups).
If you would like a personalised representative to contact you about your SMSF, or need other advice, leave your email in the form below and we will get back to you as soon as possible.
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Disclaimer: Information is current as at the date of publication. This is general information only and is not intended to be advice. Crypto is volatile, carries risk and the value can go up and down. Past performance is not an indicator of future returns. Please do your own research.
Last updated August 29, 2022