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Cryptocurrency SMSFs

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Crypto SMSF Australia Overview

When it comes to investing in cryptocurrency, Australia provides a very generous tax structure to work within. One of the most popular choices for investors that want to include Bitcoin and other cryptocurrencies within an investment strategy is an SMSF.

Legality of Cryptocurrency SMSFs in Australia

The ATO’s stance is that Bitcoin and other cryptocurrencies are not money, but rather capital gains tax (CGT) assets. This means you must keep a full record whenever you buy, sell or trade cryptocurrency so that it can be reviewed and taxed accordingly. CGT is applied for every trade you make through your SMSF.

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Types of Assets included in an SMSF

Unlike retail or industry superfunds, an SMSF allows individuals to have more autonomy over asset choice and insurance. SMSF is a very flexible vehicle for investment. Alternative assets that can be allocated to an SMSF include cryptocurrency, gold, diamonds, racing horses, yachts, private equity and collectables such as wine and art.

Associated Regulations

In order to be compliant, funds must follow the requirements of the Superannuation Industry (Supervision) Act by the ATO. All fund trustees should be aware of any changes to the law. Fund trustees are also required to maintain compliance due to the fact that all fund trustees are responsible for ensuring compliance themselves (even if they received help from a professional).

Current Tax Rate for Crypto SMSFs in Australia

One of the largest benefits of an SMSF is the low concessional tax rate of 15%. Long-term capital gains enjoy an effective tax rate of 10%. As many will notice, this tax rate is much lower than typical marginal tax rates for individuals. However, to be entitled to that tax rate, your SMSF must be classified as a complying fund. A non-complying super fund will have the highest marginal tax rate.

Summary of Cryptocurrency within a Self-Managed Super Fund

According to the Australia Tax Office (ATO), SMSFs are a type of retirement savings fund. Compared to other types of funds, SMSF members also serve as its trustees. As such, SMSF trustees must ensure compliance with the relevant super and tax laws. SMSF tax benefits make the investment vehicle a popular choice for cryptocurrency holders. Under current SMSF regulation, income is taxed at a rate of only 15% and long-term gains are taxed at an effective rate of 10%. Income generated from assets in a retirement pension are taxed at 0%.

How to

Set up a crypto SMSF account 

Apply for SMSF account

You can apply for an SMSF account your personal account in the Swyftx app.

Submit information

Submit the required information and documents relating to your SMSF.

Process Application

Once you’ve submitted your SMSF documents, Swyftx will process your application.

Risks of Crypto SMSFs

Since fund trustees are responsible for all fund decisions and compliance, risks are weighted heavier on the trustees. The risks of cryptocurrency SMSFs include low or negative returns, and assumption of full responsibility even when life changes (e.g. losing your house or job).

If you lose money through theft or fraud, you won’t have access to any special compensation schemes or to the Superannuation Complaints Tribunal. The trustees should also consider continuity of the SMSF in the event of death, relationship breakdown or incapacity.

Sole Purpose Test

The sole purpose test is one of the legislative requirements for any SMSF. The sole purpose test requires that Cryptocurrency SMSF funds can only be maintained for the sole purpose of providing fund members with retirement or death benefits. For example, if you have a piece of art in your fund, the art piece cannot be displayed at an SMSF member’s house.

Costs Associated with SMSFs

A common consideration about cryptocurrency self-managed super funds is the high number of ongoing costs that may be required for fund maintenance. According to MoneySmart, some of the costs for maintaining a cryptocurrency SMSF include:

  • Investment fees
  • Legal Services
  • Accounting fees
  • Financial Advice
  • Audit fees
  • ATO supervisory levy
  • Tax services

Many SMSF providers offer a fixed fee service that covers the required compliance costs.

Frequently Asked Questions

Can you invest your superannuation into Bitcoin?

Yes. You can roll over your super balance from a pre-existing superfund into your cryptocurrency Self-Managed Super Fund (SMSF).

What are the associated regulations with SMSF investing in cryptocurrencies?

In Australia, a Self-Managed Super Fund must adhere to super and tax laws, the most critical being the Superannuation Industry (Supervision) Act. The Australian Tax Office (ATO) is the regulator for SMSFs and the SMSF trustees are responsible for ensuring that their Crypto SMSF is compliant. For more information and to find out if your Crypto SMSF is compliant, visit the Australian Government’s official Superfund website.

Is my money safe with Swyftx?

At Swyftx, protecting our customer’s assets is our top priority. We have implemented a robust security framework to ensure that our customers can trade and store their cryptocurrency in a safe environment. We use the highest standard of industry storage protocols. Learn more about Swyftx’s security protocols and procedures. Additionally, once users have successfully purchased an asset, they can easily withdraw that asset to an external wallet.

Am I able to deposit SMSF funds into my personal account?

No, under no circumstance can you deposit SMSF funds into your personal Swyftx account. There are legal implications and tax consequences that can arise from intertwining SMSF assets with personal assets.

What documents do I need to submit?

You can find relevant information on what you’re required to submit for an SMSF crypto account with Swyftx in our Support article Set up a self-managed super fund (SMSF) account. Alternatively, you can book a consult with one of our account specialists via the form below to get you started.

How can I set up an SMSF?

After you fill out a form with a cryptocurrency SMSF service provider, the SMSF trustees will have to wait for approval from the ATO.

Once the ATO approves the SMSF, there are additional steps that trustees will have to take such as opening an account on a secure portal, opening a bank account for the SMSF, rolling over your super balance into your new SMSF, setting up a new crypto trading account for the SMSF and setting up data feeds.

The trust deed is also a crucial part of the SMSF process. The trust deed is a document that contains the rules through which an SMSF is governed. The fund’s trust deed also includes obligations, terms, and conditions of the trust.

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