September 12, 2025 • 24 mins
In this episode of SMSF Insider, host Troy discusses the ins and outs of purchasing cryptocurrency using a Self-Managed Super Fund (SMSF). He explains that while you can invest in crypto, it must adhere to the sole purpose test under the Superannuation Act, ensuring that the SMSF is solely for providing retirement benefits. Key points include the tax treatment of crypto, which mirrors other asset classes, and the necessity of keeping SMSF assets separate from personal assets. Troy emphasizes the importance of setting up crypto accounts in the name of the SMSF rather than personal names and clarifies the borrowing limitations associated with SMSFs. Tune in for essential insights to navigate the complexities of investing in crypto through your SMSF.
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Please note: The information provided in this recording is for coaching and educational purposes only. It should not be considered personal financial advice. Everyone’s situation is different, so before acting on any of the content discussed, please seek independent financial advice tailored to your specific circumstances.
Timestamps:
00:00:00 - 00:00:00: Introduction
00:01:03 - Purchasing crypto with SMSF
00:06:04 - Tax benefits of long-term holding
00:08:23 - Purchasing crypto with SMSF
00:11:48 - Crypto storage and compliance
00:18:04 - Crypto impact on retirement planning
00:21:00 - Crypto as growth booster
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:00):
So when it comes to tax treatment for crypto, it's the
same as every other asset class. It's 15% is the
tax rate if you've held it for less than 12 months. Key
takeaways is no outright restrictions on which cryptocurrencies an
SMSF can hold. You can't actually borrow to purchase crypto. When
you're borrowing through an SMSF, you use what's called a limited recourse
(00:21):
borrowing arrangement. Trading tokens or trading coins could
essentially be deemed as Welcome to SMSF
Insider, where we help busy professionals to gain financial
independence using an SMSF. Hi, I'm Troy, founder of
Blue Chip SMSF Services. Now, over the last 20 years, I've helped thousands
of Aussies manage the complexities of self-managed super funds. And
(00:43):
in this podcast, I'll answer your questions, break down the myths, so you
can take charge of your financial freedom. Let's get into it. Hi guys, and
welcome to this edition of SMSF Insider, where
we'll be talking about, can I purchase crypto using
my SMSF? The answer is, of course, yes, you can purchase
crypto using your SMSF. It must pass the sole purpose test,
(01:04):
which is part of the CIS Act or Superannuation Act. And
that is just making sure that the SMSF is providing,
the sole purpose is to provide retirement benefits to
its members. So there's a few things you need to obviously be aware of
when purchasing crypto using
your SMSF. You need to separate the assets,
(01:27):
so separate them from your personal assets. So when you're establishing
an account with your crypto exchange, you
have to set that account up in the name of your SMSF.
and making sure that it's not in the name, in your personal
name. So that's a big one. You may need to, your SMSF
exchange or sorry, your crypto exchange might want to see copies
(01:51):
of your trust documents. So we are able to,
we can send you copies of those or your SMSF provider. should
be able to send you a copy of your SMSF trust documents and
they can be provided to the exchange in setting up the
account. So make sure when you are setting up your account with your
crypto exchange, just make sure it is in the name of your
(02:12):
SMSF and not in your own personal name. At the end of the financial year,
when you have your audit and your tax returns done, the
auditor is going to want to see the name of the
crypto exchange and going to want to see who actually physically owns
those assets. And if it's not owned by the SMCF, then technically
the fund doesn't own them, which the fund could be deemed non-compliant.
(02:35):
That's the main reason is because it is checked at the end of the financial year that
the auditor will want to see the owner of those assets.
So just making sure that that is the case. Same
with the crypto wallets. So when you are with your wallet, making
sure that the owner of those coins are
in the name of the SMSF and not in your personal name. when
(02:56):
you are investing in crypto, just making sure that your SMSF
deed allows for that. And also it's covered off in
your investment strategy. So you want to make sure that your
investment strategy does have crypto assets documented
there. And also making some minutes or some notes
around the fact that you are purchasing cryptocurrency is
(03:18):
also best practice. So always a good idea
to make some documentation around that. And
also, when it comes to investing with your in-digital
assets, making sure that not only is it
documented, but it also aligns with your other assets.
So having some diversification in there. And typically speaking, your
(03:40):
crypto exposure might form a smaller
part of your overall investment strategy, not
just a one silver bullet approach. So
yeah, when you are investing in crypto, potentially you
may want some additional diversification in your portfolio, not
just having all your eggs in one basket and investing
(04:02):
all in Bitcoin, for example. Valuation, so
make sure at the end of the financial year you want to have a valuation
on June 30, you want to know what that asset was
worth. So some exchanges will provide this information to
you, but you want to keep an eye on what that value is at
midnight or 11.59 on the 30th of June. each
(04:25):
year. Typically, as I said, your exchange should be
able to provide that information to you, but your auditor will
need to know that information just to see what
the value was at the beginning of the financial year, and then when you first
purchased the asset, as well as what it's worth at
the end of the financial year. Pretty important when you're doing tax returns, and
(04:45):
then simply providing that info to your SMSF administrator
will help them when they're lodging your return at
the end of the financial year. So every SMSF needs
to have an independent audit, so your SMSF
provider or administrator will have an independent audit that
they work with, and that auditor will just
(05:08):
be sort of going through each transaction and making sure that it's
all accounted for and that the assets were
purchased in the name of the SMSF. So when it comes to tax
treatment for crypto, it's the same as every other asset
class. It's 15% is the
tax rate if you've held it for less than 12 months. If
(05:31):
you've held it for more than 12 months, you'll receive a one-third
CGT or capital gains discount. which will
bring that tax obligation down to 10% from 15%. So
if you hold the asset for less than 12 months, 15, more than 12 months,
it's 10%. And then if you hold it all the way into pension phase,
(05:51):
same as every other asset, the tax will
be zero. So, it's a pretty big one if you're holding assets
for a long period of time, all the way through to pension phase,
there's actually no capital gains tax, which is a huge
tax benefit, or huge benefit in general, when you're investing through
your SMSF. You can't actually borrow to purchase
(06:13):
crypto. So when you're borrowing through an SMSF, you
use what's called a Limited Recourse Borrowing Arrangement, or
LRBA is the acronym. And
when you're doing that, you need to be acquiring a single single
acquirable asset is what you need to purchase. And crypto unfortunately
doesn't fall into that category of a single acquirable asset
(06:37):
because you can purchase half a Bitcoin or
half an Ethereum or half of any sort
of coin. So it's not a single acquirable asset. So for
that reason you can't borrow using an LRBA or
you can't borrow to purchase crypto through your SPSF. No
loans, no personal use, so your SMSF can't
(06:58):
lend crypto to members or
related parties. So in summary, essentially you
make sure your SMSF trustee and your investment strategy allows
for purchasing crypto assets, must pass
the sole purpose test, meaning providing
retirement benefits to members. Keep the fund assets
(07:21):
separated from your personal assets. Maintain audit-ready records.
Value the assets at the end of the financial year. Avoid borrowing
or personal use for your crypto assets. And
of course, what are the tax implications? So making sure that you're
applying the right tax implications to the asset.
(07:41):
And that'll all come down to how long you've held them, whether it be less than 12 months,
or more than 12 months, or you've held them all the way through to
pension phase. So in summary, that's pretty
much it. You can essentially purchase crypto assets using
your SMSF. You can't borrow to
purchase these assets. But if you are purchasing crypto
(08:04):
assets, make sure that it's also established. The
account is established with the exchange in the name of the SMSF. make
sure the deed allows for it, make sure the investment strategy allows for it, and
make sure you're keeping audit-ready records. So
in a nutshell, yes, you most certainly can purchase crypto assets using
your SMSF. So even though there's no official list
(08:27):
of coins that you can and can't invest in, the
most suitable cryptos, or the ones that we see most,
I should say, that clients are investing in, are
your traditional and your larger cap sort of
coins like Bitcoin and Ethereum, are sort
of the most ones that we're seeing clients invest in.
(08:48):
You've also got the ability to not only invest directly
off the exchange, but you can also use ETFs, there's now ETFs out,
or exchange traded funds that are listed on the the
ASX or overseas exchanges that you can
get crypto exposure to without
actually having to or setting up an
(09:10):
exchange in the name of the SPSF. So there
is a couple of different ways of getting exposure or crypto exposure
into your portfolio and certainly ETF is another one as
well. The smaller currencies could be a little bit more riskier
in terms of liquidity and selling down some
of these coins. If you are investing
(09:32):
in the smaller cap space in
the crypto world, you might just have some liquidity issues. So that's,
I think, why we see a little bit more of clients investing
in the bigger coins. So trading tokens or
trading coins could essentially be deemed
as as carrying on a business which may
(09:53):
be in breach of the SMSF legislation so just
be mindful of that as well when you are buying and selling coins that
if you're doing sort of high volume and you are trading it could
be deemed business so just be mindful of that speak to your advisor
or your SMSF professional just to make sure you're
not stepping outside of those boundaries and
(10:16):
that your buying
and selling is deemed investment purposes and not carrying
on a business. So just be mindful of that one and get
in touch with your SMSF provider or your advisor. Just quickly guys,
if you're a busy professional fed up with traditional super funds and overwhelmed
by the setup of your SMSF, we can help. Book in a call with my
(10:38):
team using the link in the show notes and let's build your future
on your terms. Now, back to the episode. Key takeaways is
no outright restrictions on which cryptocurrencies and SMSF can
hold, but certainly the
bigger cap coins or cryptocurrencies like
Bitcoin, Ethereum and XRP and the bigger ones might
(11:01):
be a little bit easier for you to get in and out of as opposed to
the smaller ones. So not providing financial advice here, but
certainly just something to be mindful of if you are purchasing crypto
assets. Certainly the bigger coins
will be easier to get in and out of from
a liquidity perspective. And the smaller ones, probably
(11:22):
a little bit more risky. But as I said, not providing financial advice around
crypto here. I'm just obviously just just
providing some guidance around liquidity and
risk. Also, just make sure the deed obviously
covers off that you can actually invest in crypto and
obviously your investment strategy covers off on
(11:45):
crypto assets as well. So be mindful of those few things. When
it comes to storage, storing your cryptocurrencies, there's
a couple of different options or hardware wallets
you can use. There's Ledger, there's Trezor, there's Bitbox. Not
providing financial advice here, but certainly best practice is
to purchase the device in the name, the SMSF, and
(12:07):
also have that invoice addressed to the fund as well. That will certainly
help from an auditing point of view
at the end of the financial year. The private keys must be controlled
by the trustees on behalf of the fund, not individuals for personal use.
Store recovery phrases or seed phrases in
a secure fireproof safe, ideally with multi-signature
(12:29):
arrangements or trustee agreement on access.
Multi-signature wallets requires multi-trustees to
authorise transactions, helps reduce the risk of
one person misappropriation of fund assets, can
be set up via certain hardware wallets or services like
CASA, unchained or institutional custody
(12:53):
providers. Custodial solutions or professional custodians,
some SMSFs use specialist crypto custodians that
provide insured storage, compliance reporting,
and secure institutional grade cold storage. The
pros is audit friendly, clear ownership, often insured.
The cons, higher ongoing fees, reliance on
(13:16):
third party. and security best
practices. No personal wallet use. Don't
use your own Metamask or personal exchange account. It
must be the fund specific. Seed phrase
management. Keep multiple copies stored securely.
Fireproof safe. Bank safety deposit box and
(13:38):
record the custody process in SMSF minutes. Multi-factor
authentication on any exchanges used for trading. document
control, minute trustee meetings that
approve crypto purchases, storage methods and
signatories, audit and reporting, provide
(13:59):
auditors with public wallet addresses, transaction
logs and exchange reports, Evidence the
wallet belongs to the SMSF as well is a big one.
Some trustees use crypto accounting software like
Coinly, BGL, Class to streamline their reporting. I
know we use Class, which certainly helps with
(14:22):
the streamlining from a reporting point of view. Best
practice recommendation for SMSFs, use hardware wallet as
in cold storage in the fund's name with multi-signature
security, seed phrases stored securely under
trustee control and full documentation for compliance. For
larger balances, consider a professional custodian for insurance
(14:45):
and audit readiness. What steps need
to be followed to ensure compliance when investing in
crypto with an SMSF? So the pros of crypto in an
SMSF, there's some tax benefits, obviously 15% if you've
hold them for less than 12 months and 10% if you
hold them for longer than 12 months. In pension phase, income and gains may
(15:06):
be tax-free. Diversification. Exposed to a
new asset class outside of traditional shares, property and cash. Potential
hedge against fiat currency inflation. High growth
potential. Crypto can deliver outsized returns
compared to traditional assets, though obviously with that
comes higher risk. Control, so trustees choose
(15:28):
which cryptos to buy, when to trade, and
where to store them. Ability to structure storage securely,
so like hardware wallet and custodians. Estate
planning and succession. Assets held in an SMSF
remain within the super environment, allowing for structured transfer
to beneficiaries in a tax effective way. The cons, however, of
(15:51):
crypto in an SMSF is there is obviously
regulatory compliance. You must strictly separate the
SMSF assets from personal holdings. It requires accurate
record keeping, wallet identification and compliance documentation for
audits. ATO scrutiny is increasing in this area. Also
the volatility and the risk. So crypto prices
(16:13):
fluctuate dramatically. Unsuitable, which is sort
of unsuitable for sort of conservative investment strategies. Risk
of total loss in the project collapse
or if it gets hacked. So there is that risk as well. Security
responsibilities. So trustees are personally responsible for
the safekeeping of private keys. Loss of seed phrase
(16:36):
equals loss of SMSF assets and
potential compliance issues. Liquidity issues. Some
cryptos and exchanges can have low liquidity or
withdrawal delays. It can be hard to quickly convert to
cash for pension payments or other fund obligations. Audit
and administration burden. Auditors need clear evidence of
(16:58):
SMSF ownership of wallets. complex reconciliation
of trades across multiple exchange wallets. It may require
specialist crypto accounting software. Borrowing is
not allowed, so SMSFs can't use an LRBA or
Limited Recourse Borrowing Arrangement to leverage into crypto. It
must be purchased outright using the fund capital. Regulatory
(17:20):
risks, so there is a risk obviously future governments or ATO
changes could restrict crypto in SMSFs. Global
regulatory shifts may also impact liquidity and valuations. As
a balanced view, so best for trustees with a strong understanding
of crypto, appetite for risk, and robust
(17:41):
record-keeping systems. Risky for conservative trustees or
funds with members approaching retirement who need stability or
stable income generating assets. How do crypto
assets in and of themselves affect retirement planning and
long-term wealth growth? The impact on retirement planning, risk
profile, and suitability. Crypto is a
(18:02):
high-risk, high-reward asset class. So it
might be okay for younger SMSF members. Exposure to crypto can
be, obviously, growth potential over decades can be
huge. But for older members nearing retirement, volatility could
threaten the capital preservation and the ability to make reliable pension
payments. Portfolio balance, so crypto should
(18:24):
generally, generally speaking, and this is not advice of
course, be a small allocation of sort of
1-10% perhaps, depending on
the risk appetite of the trustees. But it
needs to complement, not replace your core holdings, like
property, Australian shares, international shares, equity and fixed income. Liquidity
(18:45):
requirements, so retirement means paying a minimum pension
payment. So when you are in pension phase, you do need to have
a minimum pension amount that the fund needs to pay, which
is 4% plus annually, depending on
your age. Crypto is volatile and sometimes illiquid, so
relying on it to fund pension payments can
(19:06):
be risky if values drop sharply and withdrawal
times can drag out. Long-term
wealth growth potential upside, so if adoption growths, crypto
can provide outsized long-term returns,
boosting overall SMSF wealth. A small early allocation could
meaningfully increase total retirement savings if
(19:29):
your crypto appreciates strongly. Compounding
effect, obviously over the longer term, holding crypto
within the SPSF allows tax-efficient compounding.
Efficient compounding, so 15% obviously is
the maximum tax rate, and zero on the other end
of the spectrum when you're in pension phase. The diversification benefits, so
(19:51):
crypto's returns are not perfectly correlated with
shares or property, though correlation has risen
in recent years. It can act as a good
way to diversify in a growth-orientated portfolio. Downside
risks though, however, there is obviously high volatility that
the values could crash 50% or more in
(20:13):
short time frames, potentially undermining the retirement goals. Technology
regulation risks, so if crypto adoption slows or
governments restrict use, long-term growth could be
limited. security risks, so if trustees mismanage
private keys or losses can
be permanent. So in addition to
(20:35):
that, strategic considerations for SPCFs, age
and time horizon, younger members can afford higher exposure for
growth, but older members usually need more stable more
stability. Diversification, so crypto should
be one of perhaps several growth assets in your portfolio, not
only one. Retirement phase planning, so crypto is best
(20:58):
treated as a growth booster in accumulation phase, probably
not so much as a primary source of
pension income. Exit strategy, so trustees should document when and
how crypto holdings may be sold to fund pension or
relocation to safer assets. In summary, crypto
in SMSF can boost long-term wealth growth if managed carefully, thanks
(21:21):
to concessional tax treatment and growth potential, but
it can also jeopardise retirement security if exposure is
too high, especially close to pension phase due to volatility and
liquidity risks. What is the process for liquidating crypto
assets within an SMSF? Trustee decision
and documentation. So the trustees make the decision, a
(21:44):
resolution, make some meeting minutes and record them,
the decision to sell those assets. The reason should be
tied to the SMSF's investment strategy. Example, rebalancing, risk
reduction or funding pension obligations. This
keeps you audit proof and compliant. Identify
which wallet exchange holds the assets. Confirm
(22:07):
which SMSF owned the wallets or exchange accounts
hold the crypto. Ensure the wallet exchange is clearly documented as
belonging to the SMSF, not to trustees personally. Execute
the sale through the exchange. Log into the SMSF account on
the registered exchange. and sell down
those assets and sell them, sell the chosen
(22:29):
crypto to Australian dollars and then from there,
from the cold wallet or the exchange, execute
the trade and sell them into your
SMSF bank account. It's important to always record the transaction and
the timestamps and exchange confirmations just for order keeping
purposes. And this will just
(22:52):
obviously make things easier at the end of the financial
year when the audit is conducted. Once the funds are deposited into the
SMSF bank account, the sale proceeds must flow into
the SMSF designated bank account, not any
personal account. This ensures clear separation of SMSF versus
personal assets. For record keeping and audit trail keeping,
(23:14):
exchange transaction reports, wallet transfer logs,
public addresses, transaction IDs, bank account records, many
trustees use crypto tax software, as
I mentioned earlier, like Coinly, BGL, or Class Super
to generate compliant reports. The tax treatment, so
crypto sales are treated as a disposal. So
(23:37):
within, if it's sold within a 12 month period, then it'll
be taxed at 15%. If it's taxed, if it's sold over,
after 12 months, it's 10%. And if
it's sold in pension phase, then it's a zero
tax treatment there. Thanks for tuning in to this episode of SMSF
Insider. If you got value from this, make sure you subscribe so
(24:00):
you never miss the strategies we share to help you take control of your financial
future. Find us on socials at bluechipSMSF or
So when it comes to tax treatment for crypto, it's the
same as every other asset class. It's 15% is the
tax rate if you've held it for less than 12 months. Key
takeaways is no outright restrictions on which cryptocurrencies an
SMSF can hold. You can't actually borrow to purchase crypto. When
you're borrowing through an SMSF, you use what's called a limited recourse
(00:21):
borrowing arrangement. Trading tokens or trading coins could
essentially be deemed as Welcome to SMSF
Insider, where we help busy professionals to gain financial
independence using an SMSF. Hi, I'm Troy, founder of
Blue Chip SMSF Services. Now, over the last 20 years, I've helped thousands
of Aussies manage the complexities of self-managed super funds. And
(00:43):
in this podcast, I'll answer your questions, break down the myths, so you
can take charge of your financial freedom. Let's get into it. Hi guys, and
welcome to this edition of SMSF Insider, where
we'll be talking about, can I purchase crypto using
my SMSF? The answer is, of course, yes, you can purchase
crypto using your SMSF. It must pass the sole purpose test,
(01:04):
which is part of the CIS Act or Superannuation Act. And
that is just making sure that the SMSF is providing,
the sole purpose is to provide retirement benefits to
its members. So there's a few things you need to obviously be aware of
when purchasing crypto using
your SMSF. You need to separate the assets,
(01:27):
so separate them from your personal assets. So when you're establishing
an account with your crypto exchange, you
have to set that account up in the name of your SMSF.
and making sure that it's not in the name, in your personal
name. So that's a big one. You may need to, your SMSF
exchange or sorry, your crypto exchange might want to see copies
(01:51):
of your trust documents. So we are able to,
we can send you copies of those or your SMSF provider. should
be able to send you a copy of your SMSF trust documents and
they can be provided to the exchange in setting up the
account. So make sure when you are setting up your account with your
crypto exchange, just make sure it is in the name of your
(02:12):
SMSF and not in your own personal name. At the end of the financial year,
when you have your audit and your tax returns done, the
auditor is going to want to see the name of the
crypto exchange and going to want to see who actually physically owns
those assets. And if it's not owned by the SMCF, then technically
the fund doesn't own them, which the fund could be deemed non-compliant.
(02:35):
That's the main reason is because it is checked at the end of the financial year that
the auditor will want to see the owner of those assets.
So just making sure that that is the case. Same
with the crypto wallets. So when you are with your wallet, making
sure that the owner of those coins are
in the name of the SMSF and not in your personal name. when
(02:56):
you are investing in crypto, just making sure that your SMSF
deed allows for that. And also it's covered off in
your investment strategy. So you want to make sure that your
investment strategy does have crypto assets documented
there. And also making some minutes or some notes
around the fact that you are purchasing cryptocurrency is
(03:18):
also best practice. So always a good idea
to make some documentation around that. And
also, when it comes to investing with your in-digital
assets, making sure that not only is it
documented, but it also aligns with your other assets.
So having some diversification in there. And typically speaking, your
(03:40):
crypto exposure might form a smaller
part of your overall investment strategy, not
just a one silver bullet approach. So
yeah, when you are investing in crypto, potentially you
may want some additional diversification in your portfolio, not
just having all your eggs in one basket and investing
(04:02):
all in Bitcoin, for example. Valuation, so
make sure at the end of the financial year you want to have a valuation
on June 30, you want to know what that asset was
worth. So some exchanges will provide this information to
you, but you want to keep an eye on what that value is at
midnight or 11.59 on the 30th of June. each
(04:25):
year. Typically, as I said, your exchange should be
able to provide that information to you, but your auditor will
need to know that information just to see what
the value was at the beginning of the financial year, and then when you first
purchased the asset, as well as what it's worth at
the end of the financial year. Pretty important when you're doing tax returns, and
(04:45):
then simply providing that info to your SMSF administrator
will help them when they're lodging your return at
the end of the financial year. So every SMSF needs
to have an independent audit, so your SMSF
provider or administrator will have an independent audit that
they work with, and that auditor will just
(05:08):
be sort of going through each transaction and making sure that it's
all accounted for and that the assets were
purchased in the name of the SMSF. So when it comes to tax
treatment for crypto, it's the same as every other asset
class. It's 15% is the
tax rate if you've held it for less than 12 months. If
(05:31):
you've held it for more than 12 months, you'll receive a one-third
CGT or capital gains discount. which will
bring that tax obligation down to 10% from 15%. So
if you hold the asset for less than 12 months, 15, more than 12 months,
it's 10%. And then if you hold it all the way into pension phase,
(05:51):
same as every other asset, the tax will
be zero. So, it's a pretty big one if you're holding assets
for a long period of time, all the way through to pension phase,
there's actually no capital gains tax, which is a huge
tax benefit, or huge benefit in general, when you're investing through
your SMSF. You can't actually borrow to purchase
(06:13):
crypto. So when you're borrowing through an SMSF, you
use what's called a Limited Recourse Borrowing Arrangement, or
LRBA is the acronym. And
when you're doing that, you need to be acquiring a single single
acquirable asset is what you need to purchase. And crypto unfortunately
doesn't fall into that category of a single acquirable asset
(06:37):
because you can purchase half a Bitcoin or
half an Ethereum or half of any sort
of coin. So it's not a single acquirable asset. So for
that reason you can't borrow using an LRBA or
you can't borrow to purchase crypto through your SPSF. No
loans, no personal use, so your SMSF can't
(06:58):
lend crypto to members or
related parties. So in summary, essentially you
make sure your SMSF trustee and your investment strategy allows
for purchasing crypto assets, must pass
the sole purpose test, meaning providing
retirement benefits to members. Keep the fund assets
(07:21):
separated from your personal assets. Maintain audit-ready records.
Value the assets at the end of the financial year. Avoid borrowing
or personal use for your crypto assets. And
of course, what are the tax implications? So making sure that you're
applying the right tax implications to the asset.
(07:41):
And that'll all come down to how long you've held them, whether it be less than 12 months,
or more than 12 months, or you've held them all the way through to
pension phase. So in summary, that's pretty
much it. You can essentially purchase crypto assets using
your SMSF. You can't borrow to
purchase these assets. But if you are purchasing crypto
(08:04):
assets, make sure that it's also established. The
account is established with the exchange in the name of the SMSF. make
sure the deed allows for it, make sure the investment strategy allows for it, and
make sure you're keeping audit-ready records. So
in a nutshell, yes, you most certainly can purchase crypto assets using
your SMSF. So even though there's no official list
(08:27):
of coins that you can and can't invest in, the
most suitable cryptos, or the ones that we see most,
I should say, that clients are investing in, are
your traditional and your larger cap sort of
coins like Bitcoin and Ethereum, are sort
of the most ones that we're seeing clients invest in.
(08:48):
You've also got the ability to not only invest directly
off the exchange, but you can also use ETFs, there's now ETFs out,
or exchange traded funds that are listed on the the
ASX or overseas exchanges that you can
get crypto exposure to without
actually having to or setting up an
(09:10):
exchange in the name of the SPSF. So there
is a couple of different ways of getting exposure or crypto exposure
into your portfolio and certainly ETF is another one as
well. The smaller currencies could be a little bit more riskier
in terms of liquidity and selling down some
of these coins. If you are investing
(09:32):
in the smaller cap space in
the crypto world, you might just have some liquidity issues. So that's,
I think, why we see a little bit more of clients investing
in the bigger coins. So trading tokens or
trading coins could essentially be deemed
as as carrying on a business which may
(09:53):
be in breach of the SMSF legislation so just
be mindful of that as well when you are buying and selling coins that
if you're doing sort of high volume and you are trading it could
be deemed business so just be mindful of that speak to your advisor
or your SMSF professional just to make sure you're
not stepping outside of those boundaries and
(10:16):
that your buying
and selling is deemed investment purposes and not carrying
on a business. So just be mindful of that one and get
in touch with your SMSF provider or your advisor. Just quickly guys,
if you're a busy professional fed up with traditional super funds and overwhelmed
by the setup of your SMSF, we can help. Book in a call with my
(10:38):
team using the link in the show notes and let's build your future
on your terms. Now, back to the episode. Key takeaways is
no outright restrictions on which cryptocurrencies and SMSF can
hold, but certainly the
bigger cap coins or cryptocurrencies like
Bitcoin, Ethereum and XRP and the bigger ones might
(11:01):
be a little bit easier for you to get in and out of as opposed to
the smaller ones. So not providing financial advice here, but
certainly just something to be mindful of if you are purchasing crypto
assets. Certainly the bigger coins
will be easier to get in and out of from
a liquidity perspective. And the smaller ones, probably
(11:22):
a little bit more risky. But as I said, not providing financial advice around
crypto here. I'm just obviously just just
providing some guidance around liquidity and
risk. Also, just make sure the deed obviously
covers off that you can actually invest in crypto and
obviously your investment strategy covers off on
(11:45):
crypto assets as well. So be mindful of those few things. When
it comes to storage, storing your cryptocurrencies, there's
a couple of different options or hardware wallets
you can use. There's Ledger, there's Trezor, there's Bitbox. Not
providing financial advice here, but certainly best practice is
to purchase the device in the name, the SMSF, and
(12:07):
also have that invoice addressed to the fund as well. That will certainly
help from an auditing point of view
at the end of the financial year. The private keys must be controlled
by the trustees on behalf of the fund, not individuals for personal use.
Store recovery phrases or seed phrases in
a secure fireproof safe, ideally with multi-signature
(12:29):
arrangements or trustee agreement on access.
Multi-signature wallets requires multi-trustees to
authorise transactions, helps reduce the risk of
one person misappropriation of fund assets, can
be set up via certain hardware wallets or services like
CASA, unchained or institutional custody
(12:53):
providers. Custodial solutions or professional custodians,
some SMSFs use specialist crypto custodians that
provide insured storage, compliance reporting,
and secure institutional grade cold storage. The
pros is audit friendly, clear ownership, often insured.
The cons, higher ongoing fees, reliance on
(13:16):
third party. and security best
practices. No personal wallet use. Don't
use your own Metamask or personal exchange account. It
must be the fund specific. Seed phrase
management. Keep multiple copies stored securely.
Fireproof safe. Bank safety deposit box and
(13:38):
record the custody process in SMSF minutes. Multi-factor
authentication on any exchanges used for trading. document
control, minute trustee meetings that
approve crypto purchases, storage methods and
signatories, audit and reporting, provide
(13:59):
auditors with public wallet addresses, transaction
logs and exchange reports, Evidence the
wallet belongs to the SMSF as well is a big one.
Some trustees use crypto accounting software like
Coinly, BGL, Class to streamline their reporting. I
know we use Class, which certainly helps with
(14:22):
the streamlining from a reporting point of view. Best
practice recommendation for SMSFs, use hardware wallet as
in cold storage in the fund's name with multi-signature
security, seed phrases stored securely under
trustee control and full documentation for compliance. For
larger balances, consider a professional custodian for insurance
(14:45):
and audit readiness. What steps need
to be followed to ensure compliance when investing in
crypto with an SMSF? So the pros of crypto in an
SMSF, there's some tax benefits, obviously 15% if you've
hold them for less than 12 months and 10% if you
hold them for longer than 12 months. In pension phase, income and gains may
(15:06):
be tax-free. Diversification. Exposed to a
new asset class outside of traditional shares, property and cash. Potential
hedge against fiat currency inflation. High growth
potential. Crypto can deliver outsized returns
compared to traditional assets, though obviously with that
comes higher risk. Control, so trustees choose
(15:28):
which cryptos to buy, when to trade, and
where to store them. Ability to structure storage securely,
so like hardware wallet and custodians. Estate
planning and succession. Assets held in an SMSF
remain within the super environment, allowing for structured transfer
to beneficiaries in a tax effective way. The cons, however, of
(15:51):
crypto in an SMSF is there is obviously
regulatory compliance. You must strictly separate the
SMSF assets from personal holdings. It requires accurate
record keeping, wallet identification and compliance documentation for
audits. ATO scrutiny is increasing in this area. Also
the volatility and the risk. So crypto prices
(16:13):
fluctuate dramatically. Unsuitable, which is sort
of unsuitable for sort of conservative investment strategies. Risk
of total loss in the project collapse
or if it gets hacked. So there is that risk as well. Security
responsibilities. So trustees are personally responsible for
the safekeeping of private keys. Loss of seed phrase
(16:36):
equals loss of SMSF assets and
potential compliance issues. Liquidity issues. Some
cryptos and exchanges can have low liquidity or
withdrawal delays. It can be hard to quickly convert to
cash for pension payments or other fund obligations. Audit
and administration burden. Auditors need clear evidence of
(16:58):
SMSF ownership of wallets. complex reconciliation
of trades across multiple exchange wallets. It may require
specialist crypto accounting software. Borrowing is
not allowed, so SMSFs can't use an LRBA or
Limited Recourse Borrowing Arrangement to leverage into crypto. It
must be purchased outright using the fund capital. Regulatory
(17:20):
risks, so there is a risk obviously future governments or ATO
changes could restrict crypto in SMSFs. Global
regulatory shifts may also impact liquidity and valuations. As
a balanced view, so best for trustees with a strong understanding
of crypto, appetite for risk, and robust
(17:41):
record-keeping systems. Risky for conservative trustees or
funds with members approaching retirement who need stability or
stable income generating assets. How do crypto
assets in and of themselves affect retirement planning and
long-term wealth growth? The impact on retirement planning, risk
profile, and suitability. Crypto is a
(18:02):
high-risk, high-reward asset class. So it
might be okay for younger SMSF members. Exposure to crypto can
be, obviously, growth potential over decades can be
huge. But for older members nearing retirement, volatility could
threaten the capital preservation and the ability to make reliable pension
payments. Portfolio balance, so crypto should
(18:24):
generally, generally speaking, and this is not advice of
course, be a small allocation of sort of
1-10% perhaps, depending on
the risk appetite of the trustees. But it
needs to complement, not replace your core holdings, like
property, Australian shares, international shares, equity and fixed income. Liquidity
(18:45):
requirements, so retirement means paying a minimum pension
payment. So when you are in pension phase, you do need to have
a minimum pension amount that the fund needs to pay, which
is 4% plus annually, depending on
your age. Crypto is volatile and sometimes illiquid, so
relying on it to fund pension payments can
(19:06):
be risky if values drop sharply and withdrawal
times can drag out. Long-term
wealth growth potential upside, so if adoption growths, crypto
can provide outsized long-term returns,
boosting overall SMSF wealth. A small early allocation could
meaningfully increase total retirement savings if
(19:29):
your crypto appreciates strongly. Compounding
effect, obviously over the longer term, holding crypto
within the SPSF allows tax-efficient compounding.
Efficient compounding, so 15% obviously is
the maximum tax rate, and zero on the other end
of the spectrum when you're in pension phase. The diversification benefits, so
(19:51):
crypto's returns are not perfectly correlated with
shares or property, though correlation has risen
in recent years. It can act as a good
way to diversify in a growth-orientated portfolio. Downside
risks though, however, there is obviously high volatility that
the values could crash 50% or more in
(20:13):
short time frames, potentially undermining the retirement goals. Technology
regulation risks, so if crypto adoption slows or
governments restrict use, long-term growth could be
limited. security risks, so if trustees mismanage
private keys or losses can
be permanent. So in addition to
(20:35):
that, strategic considerations for SPCFs, age
and time horizon, younger members can afford higher exposure for
growth, but older members usually need more stable more
stability. Diversification, so crypto should
be one of perhaps several growth assets in your portfolio, not
only one. Retirement phase planning, so crypto is best
(20:58):
treated as a growth booster in accumulation phase, probably
not so much as a primary source of
pension income. Exit strategy, so trustees should document when and
how crypto holdings may be sold to fund pension or
relocation to safer assets. In summary, crypto
in SMSF can boost long-term wealth growth if managed carefully, thanks
(21:21):
to concessional tax treatment and growth potential, but
it can also jeopardise retirement security if exposure is
too high, especially close to pension phase due to volatility and
liquidity risks. What is the process for liquidating crypto
assets within an SMSF? Trustee decision
and documentation. So the trustees make the decision, a
(21:44):
resolution, make some meeting minutes and record them,
the decision to sell those assets. The reason should be
tied to the SMSF's investment strategy. Example, rebalancing, risk
reduction or funding pension obligations. This
keeps you audit proof and compliant. Identify
which wallet exchange holds the assets. Confirm
(22:07):
which SMSF owned the wallets or exchange accounts
hold the crypto. Ensure the wallet exchange is clearly documented as
belonging to the SMSF, not to trustees personally. Execute
the sale through the exchange. Log into the SMSF account on
the registered exchange. and sell down
those assets and sell them, sell the chosen
(22:29):
crypto to Australian dollars and then from there,
from the cold wallet or the exchange, execute
the trade and sell them into your
SMSF bank account. It's important to always record the transaction and
the timestamps and exchange confirmations just for order keeping
purposes. And this will just
(22:52):
obviously make things easier at the end of the financial
year when the audit is conducted. Once the funds are deposited into the
SMSF bank account, the sale proceeds must flow into
the SMSF designated bank account, not any
personal account. This ensures clear separation of SMSF versus
personal assets. For record keeping and audit trail keeping,
(23:14):
exchange transaction reports, wallet transfer logs,
public addresses, transaction IDs, bank account records, many
trustees use crypto tax software, as
I mentioned earlier, like Coinly, BGL, or Class Super
to generate compliant reports. The tax treatment, so
crypto sales are treated as a disposal. So
(23:37):
within, if it's sold within a 12 month period, then it'll
be taxed at 15%. If it's taxed, if it's sold over,
after 12 months, it's 10%. And if
it's sold in pension phase, then it's a zero
tax treatment there. Thanks for tuning in to this episode of SMSF
Insider. If you got value from this, make sure you subscribe so
(24:00):
you never miss the strategies we share to help you take control of your financial
future. Find us on socials at bluechipSMSF or
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