Can a SMSF buy crypto?

Can something regulated like SMSF be used to purchase an unregulated asset such as cryptocurrencies? The short answer is yes and we’ll briefly discuss the details in this article.


Regulations On Crypto Investments Using SMSF

SMSFs are not prohibited from investing in cryptocurrencies. However, they must be allowed as stated in the fund’s trust deed, per the investment strategy of the fund, and is compliant with SISA and SISR regulatory requirements.


Proceeds of crypto investments using SMSF are treated the same way as any other SMSF asset. They can’t be accessed by the fund members until their preservation age of 55 to 60 years old. The proceeds are transferred to the SMSF account for CGT declaration and reporting.


The ATO made it clear that crypto investments are not categorized as foreign currency assets. They also clarified that bitcoin and cryptocurrency investments are subject to capital gains tax (CGT). The CGT for SMSF assets held for more than 12 months is 10%.


Here are additional rules that must be observed in holding SMSF crypto assets:


-          SMSF investments in cryptocurrencies must be held separate from your personal crypto holdings. They have to follow the sole-purpose test just like how other asset classes in the fund are held.


-          SMSF investments must be valued at their current market rate by June 30 of each financial year. This is similar to how SMSF assets are valued for reporting as of ATO guidelines.


-          SMSF cannot internationally acquire crypto assets from another party. Digital coins are not listed properties, thus they cannot be acquired from a third-party entity. This also means that the members of the fund cannot make in-specie contributions to boost the fund.


SMSF trustees may have to amend or prepare an entirely new trust deed to accommodate crypto investments.


The Cost of Investing in Crypto

Establishing a cryptocurrency SMSF account may require an average balance of AUD 100,000. The associated fees for hiring an SMSF accountant may also average around USD 1,000. There are also other fees – like audit, tax, investment, legal, and ATO supervisory levy – to consider in maintaining the account, so make sure that you study thoroughly the costs of setting up a crypto SMSF.

How To Buy Crypto Using SMSF

To invest in cryptocurrencies using your SMSF, you need to have a digital wallet for crypto transactions. You’ll also need to create an account with a crypto exchange platform which will be your online broker. Only a handful of digital wallet providers are compliant with SMSF requirements, so make sure to study them thoroughly.


Look for an exchange platform that recognises crypto investments made through an SMSF. Take note of their trading fees per transaction since you need to account for them also on tax returns. Ideally, crypto transactions in your SMSF should be done with a single digital wallet for easier record-keeping.


Risks of Using SMSF For Crypto Investments

The biggest risk you might face in having a crypto asset in your SMSF is the possibility of theft or fraud. Compared to other regulated assets held in the fund, you won’t have access to compensation schemes or help from the Superannuation Complaints Tribunal.


It’s best to seek advice from a professional SMSF advisor before making any cryptocurrency investment using the fund.



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