Cryptocurrency in SMSF
by Sam Wetzler – Investment Manager
We have recently seen an increase in the number of people looking to invest their superannuation into cryptocurrency and Bitcoin in particular. As such we thought it warranted an article to summarise the main considerations for people to look out for when considering investing in cryptocurrency with their superannuation.
Sequoia Asset Management specialises in providing general financial advice to Australian’s looking to take control of their investment decisions. An area of expertise is in helping people effectively manage their own superannuation through self-managed super funds (SMSF). As we do not take into account each individual’s circumstances the advice we provide is objective and reaches all corners of the investment market.
Key Considerations
Do I need an SMSF?
Yes. Although we expect retail and industry super funds to enable their members to take a small exposure to the likes of Bitcoin in the future, at present it isn’t an option. An SMSF enables the trustees of the fund to take control of their investment decisions and incorporate cryptocurrency into their investment strategy.
Ownership
In order to invest in cryptocurrency in an SMSF it is vital that the asset is held in the name of the SMSF and not the individual names of the trustees. There are many exchanges in Australia that enable SMSF trustees to set up accounts in the correct entity. It is important that any cryptocurrency assets owned by the SMSF are held separately to personal assets.
Record Keeping
It is important that SMSF trustees have a record of any cryptocurrency purchases and/or disposals made within the financial year. This will enable the SMSF’s accountant to work out the funds CGT position and help to reconcile any transactions in and out of the fund. A valuation showing all cryptocurrency holdings at 30 June each financial year is also required. Again, all of these records will need to be produced in the name of the SMSF so make sure the provider you are working with to purchase your cryptocurrency can provide these reports before jumping in.
Tax considerations
In 2014 the ATO issued two tax determinations clarifying that Bitcoin and other cryptocurrencies are capital gains tax (CGT) assets. Like other assets in super, the rate of CGT payable for cryptocurrency disposed of within 12 months is 15%. For assets held longer than 12 months the CGT rate drops to 10%. We suggest speaking to an accountant that understands the tax landscape for cryptocurrency before commencing any strategies in this space. The ATO guidelines can be found here.
Ways to buy cryptocurrency in an SMSF
Exchanges
Many cryptocurrency exchanges are now equipped to handle the reporting requirements of SMSFs. Below are three of the major exchanges that can facilitated transactions through an SMSF.
Savings Apps
Savings apps are a newer addition to the cryptocurrency in super landscape. The below apps enable SMSF investors to quickly set up regular investment plans in order to dollar cost average into cryptocurrency. Dollar cost averaging can be a great way to invest into volatile assets like Bitcoin.
Bamboo – Offers SMSFs the ability to invest a pre-determined amount regularly into Bitcoin and Ethereum as well as Gold and Silver. The SMSF trustee can determine the allocation per asset. For example they could allocate 100% to Bitcoin, or allocate 50% each to Bitcoin and Ethereum
Raiz – Raiz recently launched an option for SMSF. The majority of Raiz’s investment options are based around ETFs which provide exposure to stocks however they offer one portfolio with a 5% allocation to Bitcoin which they call their Saphire portfolio.
Exchange Traded Funds (ETFs)
We are starting to see an increase in the amount of ETFs in the market that provide exposure to the cryptocurrency thematic and expect more to launch over the coming months/years. You can purchase ETFs through your broker.
If you would like to discuss how a Self-Managed Superfund can assist you in investing in Cryptocurrency, please call on 02 8114 2222 or email invest@sequoia.com.au
Disclaimer
This article was not intended to provide an opinion on whether or not Bitcoin, or any other cryptocurrency is a good investment. Rather it is seeking to answer some of the many questions we receive day to day.