Buy Crypto with SMSF Account

How to Buy Crypto with a SMSF Trust

Buying Bitcoin and cryptocurrencies with a SMSF Trust in Australia is safe and easy thanks to the Australian Taxation Office's (ATO) clear guidance and tax treatment with respect to digital assets.

To help you get started, we have put together a simple step-by-step guide below that shows investors how fast it is to get started with our recommended SMSF crypto exchange in Australia:
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Step 1: Select a Regulated Exchange

The first step is to select an exchange that offers AUSTRAC-regulated services. This means the exchange must be registered with and adhere to the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (AML/CTF).

CoinSpot is our top pick for Australian SMSF Investors due to their white-glove service and seamless onboarding process.

Step 2: Set Up an SMSF Trust Account

In order to purchase digital assets with your super fund, you must set up a Self Managed Superannuation Fund (SMSF) Trust account. Once you have done this, you will provide the exchange with all the required documentation such as your Registered Trust Name & Address, Trust ABN, the Trust Deed and more.

Step 3: Buy Your Crypto

Once your SMSF Trust account is set up, you can buy digital assets without needing to pay any capital gains taxes when you sell them. CoinSpot offers investors over 370 cryptocurrencies to choose from.

Step 4: Monitor Your Holdings

In order to keep things compliant with the ATO, it is important to monitor your holdings and transactions. CoinSpot offers a free portfolio tracker that helps investors track their crypto investments in real-time.

Is It Legal to Buy Crypto with an SMSF?

It is generally legal for a self-managed superannuation fund (SMSF) to invest in cryptocurrencies, but there are certain rules and considerations that must be followed. In Australia, SMSFs are regulated by the Australian Taxation Office (ATO) and the Australian Securities and Investments Commission (ASIC). Both of these agencies have guidelines in place that must be followed when an SMSF invests in cryptocurrencies or other assets.

One of the main considerations for an SMSF investing in cryptocurrencies is the requirement to act in the best interests of the fund's members and to meet the sole purpose test, which requires that the fund be established solely for the purpose of providing retirement benefits to its members. This means that an SMSF must not invest in cryptocurrencies or any other asset for speculative purposes.

It is also important to note that any investment made by an SMSF must be properly documented and recorded in the fund's records. This includes any investments in cryptocurrencies.

Overall, it is generally legal for an SMSF to invest in cryptocurrencies, but it is important to carefully consider the risks and ensure that the investment is appropriate for the fund and meets all relevant regulatory requirements.

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Pros and Cons of using an SMSF for Crypto

There are both advantages and disadvantages to buying cryptocurrencies with a self-managed superannuation fund (SMSF). Some of the potential advantages include:

1. Diversification: Cryptocurrencies may provide an opportunity for SMSFs to diversify their investment portfolio, which can help to manage risk and potentially increase returns.
2. Potential for growth: Cryptocurrencies have the potential to generate significant returns over the long term, particularly if they are purchased at a low price and held for an extended period of time.
3. Tax Benefits:  An SMSF pays reduced capital gains tax on any profits generated from its investments in cryptocurrencies, which can help to increase the funds overall return.
   

However, there are also a number of potential disadvantages to consider, including:

1. Volatility: Cryptocurrencies are highly volatile and can fluctuate significantly in value over short periods of time. This means that SMSFs may face significant losses if the value of their cryptocurrency investments decreases.
2. Risk of fraud: There is a risk of fraud associated with investing in cryptocurrencies, as some ICOs (initial coin offerings) and cryptocurrency exchanges have turned out to be scams.
3. Regulatory risk: The regulatory landscape for cryptocurrencies is constantly evolving, and there is a risk that regulatory changes could negatively impact the value of SMSF investments in cryptocurrencies.
4. Limited liquidity: It may be difficult to sell large quantities of cryptocurrencies quickly, which could make it difficult for SMSFs to liquidate their investments if needed.

Overall, it is important for SMSFs to carefully consider the potential advantages and disadvantages of investing in cryptocurrencies and to ensure that such investments are appropriate for their investment strategy and risk profile.

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Final Thoughts

Investing in cryptocurrencies with a self-managed superannuation fund (SMSF) can be a great way to diversify an investment portfolio and potentially generate additional returns. However, there are risks associated with such investments, including the potential for fraud, volatility and regulatory changes.

Therefore, it is important to carefully consider the potential risks and benefits before investing in cryptocurrencies with an SMSF. Additionally, any investments must meet relevant regulatory requirements and be properly documented and recorded within the fund's records. Lastly, investors should seek professional advice before making any investment decisions to ensure that such investments are appropriate for their individual circumstances.