Crypto and Super Funds
Can I invest in cryptocurrency within my SMSF?
Cryptocurrency has been a hot topic in the news lately raising many questions for investors. We have fielded many queries ranging from: what is cryptocurrency? to how or where can I invest should I want to?
We have received a number of calls from clients asking specifically whether it is possible to invest in cryptocurrency within their SMSF and hence wanted to share our findings to date (as no doubt this area will continue to evolve).
We highlight below some key considerations for trustees before making a decision regarding a cryptocurrency investment within their SMSF.
- Will our SMSF Trust deed allow the investment?
The SMSF must ensure that investments in digital currencies are allowable under the trust deed. Trustees of the fund may need to have an amendment to their trust deed prepared or possibly execute a new deed.
- Does our investment strategy allow a cryptocurrency investment?
Trustees will need to consider the content of the investment strategy to ensure if reflects the investment objectives and retirement goals of the members with reference to cryptocurrency.
- Does an investment in cryptocurrency satisfy the sole purpose test?
The sole purpose of the SMSF needs to be considered in that the SMSF is maintained for providing retirement benefits to the members, or to their dependents.
- What are the income tax implications of gains / losses?
Provided cryptocurrency is held as an investment, it is treated as a CGT Asset under subsection 108-5(1) of the Income Tax Assessment Act 1997
- What name do I need to purchase the cryptocurrency in?
Where an asset is held within an SMSF, the auditor will require source documentation that confirms ownership within the SMSF. Trustees would be required to purchase the wallet and storage device/services in the name of the SMSF.
- Are related party transactions allowed – ie. purchase or sale?
We note the SMSF can dispose of cryptocurrency to related parties of the SMSF on arm’s length terms, ie. at market value. However, an SMSF is specifically prohibited from acquiring cryptocurrency from related parties.
Depending on your financial situation, a self-managed super fund (SMSF) can give you more control over your superannuation and retirement. With complicated rules and strict governance in place, those looking at investing in cryptocurrencies should always seek professional advice. Should you wish to know more, please contact our office on 08 8333 7300.