- Cryptocurrency can be included as part of a self-managed super fund (SMSF) to reduce taxes and increase profits.
- Setting up an SMSF gives you control over investment decisions and allows you to invest in cryptocurrencies.
- Benefits of a crypto SMSF include reduced taxes, lower fees compared to regular super funds, more control over funds, and protection from creditors.
- Downsides of a crypto SMSF include legal responsibilities, time and financial commitment, the need for investment knowledge, and the requirement to live in Australia.
Cryptocurrency is now seen as a legitimate investment asset class, as evidenced by Commonwealth Bank making crypto available to their customers. Large institutional traders like to include crypto as part of their diversified portfolio, and we have even seen the introduction of cryptocurrency ETFs. For anyone considering how to build their wealth in preparation for retirement, adding cryptocurrency as part of a self managed super fund (SMSF) is one way to reduce tax and increase profits. Here at Debt Bombshell, we will help you learn all about self managed super funds, decide if it's right for you, and teach you how to set one up.
What is a self managed super fund (SMSF)?
First things first, you may have heard of a self managed super fund, but what exactly is it? To put it in simple terms, a SMSF is a private superannuation fund that you are in control of. You can have up to a maximum of 6 members with you, who are all trustees; the trustees have responsibility of the super fund, and select the preferred investments and insurance. The self managed super fund is for the benefit of the trustees only, and the onus is on you to ensure you are compliant with all superannuation and taxation laws.
Why should I set up a self managed super fund?
There are several benefits and also disadvantages of running your own SMSF, so you need to make sure you have considered both sides carefully before making a decision. We'll start by looking at the benefits of a SMSF.
Control over investment decisions
The main point of starting your own self managed super fund is so that you (and your trustees) can choose exactly what you invest in. Most existing super funds do not have options for you to invest in crypto, so the only way is to set up your own SMSF. When you run a crypto self managed super fund, you are able to choose which coins you want to invest in, and how much to put into each one.
It is important to note that you need to check all the relevant laws to make sure you are fulfilling all the stringent criteria to operate legally. As an example, any crypto in a SMSF must be totally separate from your own individual crypto account. This means you cannot have the crypto exchange account in your own name, but instead it must be in the name of your super fund. Our #1 choice for crypto SMSF is CoinSpot (read full review), which offers the option to open an account in the name of your SMSF.
The crypto exchange you select for your SMSF has to be an Australian platform, because of the difficulties in retrieving data from international exchanges, as well as them not allowing you to open an account in the name of the SMSF fund. You can read about the best crypto exchanges in Australia, or sign up with our top recommendation, CoinSpot.
Another big reason people like to set up a crypto self managed super fund is because you can receive much lower tax rates of just 15%. If you are realising crypto gains in your personal account, you will be usually paying between 32-37% tax, and as high as 45% if you are a high income earner. The reduction of tax to just 15% means you are paying less than half the amount in tax.
Lower fees than regular super fund
A lot of people assume that the cost of running their own SMSF is too high, and the compliance fees will eat into your funds. These days the costs are much lower than they were in the past, because there is a lot of competition between service providers. You can elect to reduce your costs if you don't enlist as much help from professionals.
A note to remember: if you do not have much in your super, then it can be more expensive to run your own SMSF, because there are many fixed costs involved. The larger your super balance (or your combined super with the other trustees), the more beneficial it is, because your fees are fixed, and not charged as a percentage of your total balance like it is in a regular fund. A good rule of thumb is that you should have $250,000 or more in a SMSF to be worth your while.
More control over your funds
You and your trustees can decide on how you want to invest your money, to a level that is not possible with a regular super fund. If the crypto market is changing, you can choose to switch your assets to a different coin, or even a stable coin, as per your preferences.
Protection from creditors
In case you are in the unfortunate position where you owe money to a bank or other financial institution, any crypto you have in your SMSF cannot be taken from you. Under normal circumstances, creditors cannot touch your super, so you will not lose any of your crypto held there; an exception would be if you sent your crypto into your self managed super fund to get out of paying the debt.
What are the risks and downsides of a Crypto SMSF?
You must ensure you think about the possible risks and disadvantages of setting up a crypto SMSF before rushing headfirst into it. We discuss some of these below, but you should also get professional advice from a financial advisor and a tax agent before making any decisions.
Since you and your trustees are in charge of the super fund, you must keep up to date with all the necessary legislation and compliance. If you don't follow all the rules, you may receive a high penalty from the ATO, in which you are personally liable. You must also maintain the running of the fund at all times, even if you encounter difficult personal or financial circumstances.
Requires time and money
Establishing a SMSF and continuing to run it will take a lot of time and money. Besides researching potential investment opportunities, you need to set and follow strategies, maintain records, take care of accounting, and schedule audits. There are also running costs for accounting, auditing, tax advice, legal advice, and financial advice. If you have less than $250,000 combined assets in the SMSF, then it will not be beneficial for you to set it up.
You are in charge of investment decisions
Seeing as you and your trustees are the ones running the fund, the investments are decided solely based on the members. If you don't have good investment knowledge, you could make some poor choices that deplete the funds in the account. Cryptocurrency in particular is a risky and volatile asset, and you need to remember that past performance does not guarantee future performance. You need to be sure that the investment decisions you make are sound, and keep your portfolio diversified to minimise risk.
You must live in Australia
Most of the members in the fund must live in Australia permanently, in order to abide by Australian laws. If you wanted to set up a SMSF but you don't live in Australia, or if you are considering relocating internationally, this may become an issue.
Pros and Cons of a Crypto SMSF
How do I set up a Crypto SMSF?
If you have done your research, sought legal and financial advice, and have made up your mind to start your own crypto SMSF, what is the next step? Have a look at this useful information from the ATO that can guide you on your journey. Once your SMSF has been created, the next important step is choosing a trustworthy and legitimate crypto exchange to use. In order to satisfy the requirements of Australian tax reporting laws, you must choose an Australian crypto exchange. You can choose from our list of the best exchanges in Australia, but my personal recommendation is CoinSpot.
Frequently Asked Questions
Your self managed super fund needs to comply with super and tax laws, in particular the Superannuation Industry (Supervision) Act. The ATO regulates SMSFs and the trustees of the super fund are solely responsible for making their crypto SMSF fully compliant. To learn more about ensuring your crypto SMSF meets all the strict obligations, you can go to the Australian Government's
that their Crypto SMSF is compliant. For more information and to find out if your Crypto SMSF is compliant, visit the Australian Government's SMSF website.
While you may not find a regular super fund that lets you invest in crypto, you can set up your own crypto SMSF with many benefits, such as lower tax rates of just 15%. You need to use an Australian cryptocurrency exchange and sign up using the name of your self managed super fund. Our #1 suggestion for this is to use CoinSpot, who can help you set this up easily.
You shouldn't move your cryptocurrency from your crypto SMSF into liquidity pools. At the end of each financial year, your SMSF is audited, and you need to identify where all your crypto is. The more movements you have made, the harder it is to track, making the EOFY process more difficult and costly. The best way to store your crypto is to move it into a crypto hardware wallet.
Best places for Crypto self managed super fund
When you choose a crypto exchange for your SMSF, you want to look at a few main things: trust, security, low fees, range of investment options (different cryptocurrencies), and ease of use. We have come up with the 2 best sites for setting up your crypto self managed super fund, listed below, with a brief explanation of why we placed them in our list.
#1. CoinSpot: Best Crypto SMSF - Most Secure
CoinSpot is our #1 choice for cryptocurrency SMSFs. It is the most secure out of all the crypto SMSFs since it holds the ISO 27001 certification, making it the most audited and trusted crypto exchange in Australia. CoinSpot has been around since 2013 and have over 2.5 million users, a testament to their popularity and longstanding trust in the crypto community.
The fees at CoinSpot are slightly higher, at 1%, but for the price, you are getting unrivalled security and peace of mind. There are over 410+ different cryptocurrencies available that you can invest in, and staking on 21 coins so you can grow your super over the years. The platform is extremely easy to use and 24/7 live chat support is on hand, so there is no need to worry about your super fund when you use CoinSpot. To learn more, read our detailed review of CoinSpot here.
#2. Swyftx: Runner-up best Crypto SMSF
Swyftx is our #2 recommendation for a crypto self managed super fund. It came second in our test of the lowest fees and spreads and it has an excellent demo mode, which lets you practise investing with $10,000 of play money. This means you can use it to test out any investment strategies before committing to it with real money in your super fund. The fees to buy and sell crypto are 0.6% and there are more than 320+ coins on offer.
Swyftx is also a legitimate and trusted crypto SMSF platform, and has been around since 2017. It has not been subject to any cybersecurity breaches, and there is responsive live chat customer support to assist you with any problems. See our comprehensive review of Swyftx here.