A Self-Managed Super Fund is the kind of super fund in which the investor has the power to manage their investments. Through SMSF, one can gain control over their funds by getting advice from experienced accountants and their choice of financial planners. Australian Taxation Office (ATO) recently released statistics showing that more than 600,000 SMSFs are registered in Australia. In 2014, ATO deemed Cryptocurrency SMSF as a legitimate form of investment.

With this rule, there was a spike in investment made towards Cryptocurrency SMSF in recent years. Cryptocurrencies have been on the rise since Bitcoin reached a peak in the late 2010s, hitting the peak at $25,506. Additionally, Australia is preferred for investment in Cryptocurrency for its tax benefits. Under SMSF provided in the country, the benefits are taxed at 15%.

With a well-planned investment strategy, one can gain tremendous benefits through their SMSF by investing in cryptocurrencies such as Bitcoins.

How to Get Started with Cryptocurrency SMSF?

How to Get Started with Cryptocurrency SMSF

The best way to initiate investment in Cryptocurrency under SMSF is to employ a financial advisor. They can help to formulate a plan and investment strategy that can ensure positive results in the future. The following steps will help you lead a successful investment plan for setting up Cryptocurrency SMSF.

  • Structure: The first step is to choose the structure for your SMSF. One can choose to run the fund as a corporate trust with different individuals investing in it or opt to have individual trustees. The structure will help you narrow down the ATO guidelines that detail membership requirements, penalties, costs, etc.
  • Appoint Trustees: Once the fund structure is defined, one will need to appoint trusted members. One can list out a detailed eligibility criterion to narrow down their selection.
  • Registration: One should ensure that they register as an Australian super fund to ensure that they get the tax benefits as ruled by ATO. Register the SMSF and obtain an ABN.
  • Digital Bank Account: To begin investing in Cryptocurrency such as Bitcoin, one would require a digital bank account through which they can perform monetary operations. Once the fund is registered, one needs to set up a bank account.

Things to Keep in Mind While Setting Up Cryptocurrency SMSF

Things to Keep in Mind While Setting Up Cryptocurrency SMSF

During the registration of a Cryptocurrency SMSF, one needs to make sure that they go through all the guidelines provided by ATO. Given below are the key parameters that one needs to keep in mind and follow for a successful operation of SMSF.

  • The trust deed of the fund must allow for Cryptocurrency investments.
  • The fund needs to perform the investment as per the investment plan that they had verbalized during the registration.
  • The investment made under SMSF on Cryptocurrency should comply with all the rules and regulations stated in the Superannuation Industry Act 1933.

How to Buy and Sell Cryptocurrency under SMSF?

As stated above, investing in Cryptocurrency requires one to have a digital wallet. According to experts, cold wallet service providers are more suited for the kind of investments and activities under SMSF. These wallet services provide a safer environment for investors with a private key and other additional security benefits.

One should also note that they will be charged a specific trading fee for every transaction. The fee ranges from 0.4 to 1%, depending on the choice of the wallet service and the scale of the transaction made.

Moreover, as per the Australian rules for superannuation investment, unless the investor crosses the preservation age, they cannot access the investment. The prevention age ranges from 55 to 60 years.

Tax Benefits Under Cryptocurrency SMSF

Tax Benefits Under Cryptocurrency SMSF

The assets under SMSF are valued at the end of each financial year at the current market rate. Along with the trading fees paid for each transaction to be processed, the benefits received under-investment made on cryptocurrencies are regarded as an asset for capital gains tax (CGT). If the investments are held longer than 12 months, then the tax is calculated at the rate of 10%. For investment held for less than 12 months, the rate is 15%.

Risks Under Cryptocurrency SMSF

Cryptocurrency works similarly to any other kind of investment. They experience ups and downs in the market. Taking the example of Bitcoin that experienced a downfall in 2020 to 15,000, one can expect it to be a high-risk investment. Additionally, Cryptocurrency is not supported by any bank or Australian Government.

Cryptocurrencies are still considered a high-risk investment though one can ensure better benefits with a well-planned and futuristic strategy. Along with this, if one remains technologically alert and acquires financial advice regularly, they can avert any risk effectively.

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