Author: Jesse Coghlan
Having cryptocurrency within a self-managed super fund (SMSF) is becoming very popular amongst those looking for higher returns on their super earnings, with a multitude of companies now offering a path for a “crypto SMSF”.
SMSF’s aren’t for everyone, they typically have higher costs for operating, sometimes up to $12,000/ year have more stringent regulation, and as the name implies, you will be responsible for managing not only the money in the fund, but ensuring it remains compliant.
With that in mind, why would anyone want to go through all of that just to invest in crypto? Well, some believe the cost of running the fund is worth the potential return that cryptocurrencies could offer in the future. Historically, some cryptos have gained between 60 to 100% and in some cases, over 2,000% in only a year, far surpassing the 10% that some of the best performing super funds promise. Keep in mind, past performance doesn’t indicate what will happen in the future.
So, how to buy cryptocurrencies within your self-managed super fund? After setting up your SMSF, you’ll need to link your fund with an exchange offering cryptocurrencies, and ensure those investments are held and managed separately from any other investments. It will need to be clear that the fund is the owner of the crypto and maintain a separate account or digital asset wallet.
Whether you’re interested in making your own self-managed super fund for cryptocurrency or already have a fund and are wanting to add crypto to your holdings, we will start from the beginning. If you haven’t already, make sure you do your homework, understand the risks, and are 100% confident that a crypto investment is suitable for your SMSF.
There are a small range of companies offering a crypto SMSF, such as Bamboo’s SMSF product, to keep it simple, we’ll use that to demonstrate how this type of fund works.
Firstly, you need to establish the fund, this involves creating a trust deed, appointing a trustee, signing a trustee declaration, registering your fund with the Australian Taxation Office (ATO), opening a bank account for the fund, and finally, getting an electronic service address, so contributions can be made by employers.
Cryptocurrencies are extremely volatile, speculative, and complex, you will have to ensure your fund’s trust deed is written to accommodate the risks of investing in this type of asset.
Some steps do incur a cost, and you will have ongoing fees and obligations for your fund, again, ensure you’ve done your research on this.
Now comes the part where we link our SMSF with Bamboo, so we can invest in cryptocurrency through our fund, it’s very simple, and all you’ll need is 3 things:
1. Your Fund Name
2. Trustee Name
3. BSB and ACC
Type those into the app, and once you transfer across your capital, you can buy Bitcoin and Ethereum, and in the case of our example app, precious metals such as gold and silver are available too.
If cryptocurrencies are part of your super fund portfolio, the ATO classifies bitcoin and cryptocurrencies like bitcoin not as “money” but as capital gains tax (CGT) assets, like stocks or ETFs. You will have to keep a record when buying and selling your crypto to remain compliant with tax regulations.
