Crypto Currency Investing in SMSFs Bitcoin, Ethereum, Litecoin, and over 5,000 altcoins have become popular among SMSF investors. However, before you invest in cryptocurrency through an SMSF, you must understand the compliance rules. To remain compliant, check these three key areas: Who owns the asset – Open the trading account in your SMSF’s name. How […]
Crypto Currency Investing in SMSFs
Bitcoin, Ethereum, Litecoin, and over 5,000 altcoins have become popular among SMSF investors. However, before you invest in cryptocurrency through an SMSF, you must understand the compliance rules.
To remain compliant, check these three key areas:
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Who owns the asset – Open the trading account in your SMSF’s name.
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How holdings are stored – You cannot mix personal and SMSF crypto in the same hardware or software wallet.
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Trust deed permissions – Ensure your trust deed allows for crypto, collectables, and derivatives. Update your investment strategy to reflect crypto assets.
Understanding the Super Laws
The Superannuation Industry (Supervision) Act 1993 (SIS Act) guides SMSF trustees on selecting suitable investments. While the law does not ban Bitcoin or altcoins, it sets clear responsibilities for trustees.
Key sections to consider:
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Section 62 – Sole Purpose Test: Investments must serve retirement or death benefit purposes.
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Section 4.09: Update the investment strategy regularly, considering risk, age, and asset allocation. Treat crypto as its own asset class.
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Section 4.09A – Separation of Assets: Keep SMSF crypto separate from personal holdings.
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Section 13.18AA – Collectables Storage: Store crypto to prevent personal benefit.
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Section 66: Avoid acquiring assets from related parties, except in specific circumstances.
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Section 71: Limit in-house assets to 5% of the fund’s value.
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Section 109: Keep transactions at arm’s length.
Storage and Compliance
Just as you cannot keep jewellery or cars at home for personal use, you cannot store SMSF crypto in personal wallets. All crypto assets must be owned and controlled by the SMSF.
Your trust deed should have no restrictions on crypto or collectables. The investment strategy should outline the level of investment, risk considerations, and asset allocation. Research reports can serve as evidence of due diligence.
What SMSF Bitcoin Auditors Check
Auditors will verify:
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The storage location of the SMSF’s crypto assets.
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The market value from a reputable exchange.
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All buy and sell transaction receipts for the financial year.
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Proof of purchase for a hardware wallet in the SMSF’s name.
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Evidence of cold wallet holdings, such as screenshots and blockchain explorer verification.
Staying Compliant
To invest in crypto through an SMSF and remain compliant:
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Maintain assets at arm’s length.
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Avoid early access to super.
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Store assets according to SIS regulations.
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Be aware of leveraged investments and income distributions, as these may have tax or compliance implications.
Risks of SMSF Crypto Investing
Crypto is highly volatile, subject to legislative change, and complex to secure. Risks include:
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Loss of private keys
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Hacks and cyberattacks
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Counterparty failure
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No AFCA protection for theft or fraud in SMSFs
Always seek professional legal and financial advice before investing.
