SMSFs Crypto Investing

8 Apr

SMSFs Can Invest In Crypto But Is It Worth Switching?

Posted at 09:04h

Your superannuation is your pathway and funding to your retirement and golden years, so you want to make sure that your investments are giving you the best returns that they possibly can.

If you are in a retail or industry superannuation fund, you are limited in what assets you are able to invest your fund into. A retail or industry super fund has a lot more investment restrictions and limitations than an SMSF (including whether or not the fund can invest in cryptocurrency). Switching from a retail or industry superannuation fund to a self-managed super fund (SMSF) requires careful planning, consideration and forethought.

A self-managed super fund grants you and any other trustees more control of your investment options and asset distribution, including whether or not you choose to invest some of your superannuation into cryptocurrency or other high return assets. As the trustee of your SMSF, you need to be aware that these high return assets may have greater risks, and your decisions on investments for the fund (whether advised on them or not) need to comply with the law.

If you decide to set up an SMSF, professional advice should be sought about what investments to make. If you decide to invest in crypto-assets for your SMSF, you should consider the risks and the rules around the investments that an SMSF can make, as well as the tax implications.

This will include:

  • That the investment into the crypto-asset is permitted under the fund’s trust deed and is in accordance with the fund’s investment strategy.
  • That the investment strategy documents how the fund’s investment into the asset will meet your retirement goals, especially regarding:
  • Diversification
  • The risks of inadequate diversification
  • Liquidity (how easy it is to convert the asset to its market price)
  • The ability of the fund to discharge its liabilities
  • How the fund will demonstrate the ownership of a digital asset like cryptocurrency, when physical proof of the asset is not available.

As a trustee, it might be tempting to ride the cryptocurrency trend – however, be aware of the risks, what professionals are advising and whether the investment is worth the heightened risk. Investment scams involving superannuation and cryptocurrency have been on the rise, so be especially careful around investment opportunities that may seem too good to be true, or unlicensed operators involved in crypto investing.

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