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Bitcoin investing in an SMSF – catch the Bitcoin bull run

Bitcoin Investing in an SMSF: A My SMSF Guide

Investing in Bitcoin through a Self-Managed Super Fund (SMSF) has become an increasingly popular option for SMSF members, in Australia, looking to diversify their retirement portfolios. With the Bitcoin halving just around the corner and Bitcoin hitting an all time high of $70,000 USD a coin, Bitcoin offers a unique investment opportunity; however, it also comes with its complexities, especially when navigating the regulatory landscape of SMSFs. In this My SMSF guide, we’ll explore the process of investing in Bitcoin within an SMSF, highlight two local exchanges and one foreign exchange, and outline the Australian Taxation Office (ATO) and auditor requirements that need to be met.

Why Selecting a local exchange is important:
When it comes to purchasing Bitcoin for your SMSF, the choice of exchange is crucial. A reliable and compliant exchange ensures not only the security of your funds but also the legitimacy of your transactions in the eyes of regulatory bodies. Most Australian exchange have accounts for SMSF members investing in crypto and Bitcoin. Most Foreign exchanges however do not, so approach foreign exchanges with care, if they do not offer a specific SMSF crypto trading account facility.

Local Exchanges:
1. CoinSpot: One of Australia’s leading cryptocurrency exchanges, CoinSpot offers an SMSF account option that provides access to over 300 cryptocurrencies, including Bitcoin. To open an account, SMSFs need to complete the application process, which includes providing details of the SMSF trust and trustees, and undergo a verification process.
2. Easy Crypto: Easy Crypto Exchange. Known for its user-friendly interface and straightforward transaction process, Easy Crypto offers a seamless experience for buying, selling, and trading a wide array of cryptocurrencies, including Bitcoin. Setting up an SMSF account with Easy Crypto is a smooth process that requires the submission of the SMSF’s trust deed and verification of the trustees’ identities, similar to other exchanges. What sets Easy Crypto apart is its commitment to security and customer support, providing investors with peace of mind and assistance.
Foreign Exchange:
• Kraken: A globally recognized cryptocurrency exchange, Kraken allows investors worldwide, including those from Australia, to trade Bitcoin. While it offers robust security features and a wide range of cryptocurrencies, SMSFs looking to use Kraken should ensure they understand the tax implications and regulatory requirements involved in dealing with a foreign exchange.

Opening an Account and Starting to Buy Bitcoin
To open an account on any of these exchanges, the process generally involves:
1. Registering the SMSF as an entity on the exchange’s platform.
2. Providing detailed information about the SMSF trustees.
3. Submitting documentation proving the existence of the SMSF, such as the trust deed.
4. Completing identity verification for all trustees.
5. Once verified, funding the account from the SMSF’s bank account.
After setting up the account, you can start buying Bitcoin. It’s advisable to familiarize yourself with the platform’s trading tools and options, such as limit orders, which allow you to set a specific price at which you’re willing to buy.

Meeting ATO and Auditor Requirements
Investing in Bitcoin through an SMSF requires compliance with specific ATO guidelines and auditor requirements:
• Investment Strategy: The SMSF’s investment strategy should clearly include cryptocurrency as an allowable investment, considering the risk profile and diversification.
• Ownership and Separation of Assets: It must be clear that the SMSF owns the Bitcoin. This involves holding the cryptocurrency in a wallet where the SMSF is the owner, separate from personal or other business assets.
• Valuation: For reporting purposes, the SMSF must regularly value its Bitcoin investment according to ATO guidelines, typically at market value.
• Record Keeping: SMSFs are required to keep detailed records of cryptocurrency transactions, including dates, values (in AUD), and the purpose of the transaction (e.g., investment, personal use).
• Auditing: Annually, the SMSF must be audited by an approved SMSF auditor. The auditor will review the SMSF’s compliance with superannuation laws, including those related to its Bitcoin investment.

Investing in Bitcoin through an SMSF is not for everyone. However given high capital growth and the ability to convert $1.9 million per member into a tax free pension, these tax advantages and hodling approach favours, SMSF Bitcoin and crypto investors. It also represents a forward-thinking approach to diversification and growth within your retirement portfolio. However, navigating the regulatory and compliance landscape requires careful planning and adherence to ATO guidelines and auditor requirements. By choosing the right exchange and ensuring that your SMSF’s investment strategy and record-keeping practices are up to standard, Bitcoin investing in an SMSF can be a rewarding investment journey for some Australians.