As Bitcoin and other cryptocurrencies continue to prove viability as both speculative investments and a means to store value, the desire to allocate a portion of an individuals superannuation is quickly becoming a popular method to increase exposure to the relatively new asset class.
By using a self managed super fund (SMSF), it is possible to purchase and sell cryptocurrencies, but there's a few steps required in order to achieve this.
The guide covers all the important facts and tips to help you get started.
Much of the speculative investment into Bitcoin revolves around it's potential as a deflationary currency to function as a store of value upside and provide value upside if adoption increases on the long-term. This aligns well for many who undertake investments made within a super fund aimed at securing capital for the long term and later in-life years.
While it might be easy to say that almost every industry vertical on the planet stands to be disrupted by the adoption of blockchain technology, it's important to understand that any investment into cryptocurrency ultimately remains an investment into an experimental technology.
Serious consideration should be weighted to this fact, and consultation to an accountant or financial advisor who understands your circumstances can be critical to ensuring a balanced and sustainable approach to managing a SMSF.
In order to invest into any cryptocurrency using a SMSF, there must be a Trust Deed and Investment Strategy for the fund which both refers to regulations used to authorise the crypto-based investments, and further contain clearly a documented strategy for investment that explicitly states cryptocurrencies as an intended asset for the fund to acquire and dispose of.
All SMSFs must adhere to the soul purpose test.
This test requires the fund to provide retirement benefits to the fund member or members, or be distributed to dependents in the event of death before retirement.
Any personal use of cryptocurrency that was acquired by the SMSF would breach this requirement, as it must remain separate from personal assets.
This means separate bank accounts, separate exchange accounts and separate hardware wallets for asset storage. While Bitcoin can easily be sent to a personal address, doing this would constitute a personal benefit. As self managed super funds are independently audited, this would more than likely be identified and result in punishment.
As the cryptocurrency will need to be stored in a wallet, there must be documentation that clearly confirms the fund to be the beneficial owner of the cryptocurrency acquired.
All trading history must be clearly documented and match the banking balances and documentation to support how assets were purchased. This can be in part achieved though the use of a separate bank account dedicated to the SMSF.
As an asset, capital gains tax will be payable on any realised increase in value. If the cryptocurrency decreases against the fiat dollar, a loss could also be recorded to reduce tax obligations in future.
As a large order cryptocurrency brokerage, HiveEx offers the ability for SMSFs to invest directly into cryptocurrencies in clean, single quote price trades that not only secure institutional pricing, but minimize the accounting overhead in tracking investments or sales.
If you do not yet have a SMSF, our team provides end-to-end support and works with a range of specialised partners experienced in managing SMSFs for the purpose of gaining cryptocurrency exposure, cryptocurrency hardware wallet providers for the safe storage of digital assets, physical custodian services for 'bank vault' security and tax agents who hold a deep understanding of cryptocurrency tax implications.
To invest via a SMSF, HiveEx will need the following:
- Registered Trust name
- Registered Trust address
- Trust ABN
- A copy of the Trust deed
- Trust beneficiary details