Crypto SMSF Guide For Australians (2023)

Last Updated on July 14, 2023 by Kevin Groves

With public interest in cryptocurrencies growing and their acceptance by the Australian Tax Office (ATO) as investment vehicles, their incorporation in a Self-Managed Super Fund (SMSF) has increased. As a result, several of the top Australian digital currency exchanges offer SMSF support for investors who are seeking to build a long-term store of value for retirement purposes.

Allocating a portion of your funds to incorporating digital currencies as part of your SMSF can hold notable advantages, however, there are specific regulations and legalities to be aware of. This article breaks down what is required, the legalities, and which crypto exchanges support SMSF investors.

Disclaimer: The information contained in this article is for educational purposes and is in no way intended to act as financial, legal, tax, or investment advice. You should conduct your own research and seek professional advice to fully understand the potential risks and obligations for your individual situation.

What Is A Self-Managed Super Fund?

An SMSF is a self-managed super fund that is built for the purpose of providing retirement funds. They are unique to super funds offered by industry and retail providers since they are owned and operated by its members and Trustees. This means that they are wholly responsible for ensuring that it complies with all super and tax regulations. Non-compliance with regulatory requirements represents the largest risk to SMSF investors.

Compared to other types of superannuation funds, members of an SMSF are also considered Trustees. As the Trustee, you are responsible for making investment decisions that provide financial benefit for all Trustees.

Can I Use My SMSF To Invest In Crypto?

According to the ATO, cryptocurrencies are not prohibited from being acquired as part of an SMSF. In order for crypto to be incorporated in an SMSF, it must be acknowledged and allowed as an investment asset under the Trust Deed and be in accordance with the fund’s investment strategy.

Although cryptocurrencies possess similar characteristics to traditional money, they are not regarded by the ATO as such because they are not legal tender in any other country. The ATO regards digital currencies as assets or property and is subject to taxation if capital gains or financial benefit occurs.

According to an ATO report, investing in cryptocurrencies as part of SMSFs grew by 4% during 2020 to a value of $220 million. Cryptocurrencies are held as investment assets in over 3,300 SMSF accounts (approximately 0.6% of all Australian SMSFs) whereby only 16% of assets comprise digital assets.

Crypto SMSF Regulations & Requirements

Inclusion in the Trust Deed and strategy

The idea of using cryptocurrencies as part of an SMSF stems from the notion that they will appreciate in value over time. For digital currencies to be incorporated as part of an SMSF, the Trust Deed must allow crypto assets to be a form of investment vehicle. Additionally, the overall investment strategy must acknowledge cryptocurrencies to be an investable asset. If an SMSF does not satisfy this then the Trust Deed needs to be amended to reflect this.

Demonstrating ownership

Since cryptocurrencies are typically stored in online wallets, members and Trustees will need to be able to demonstrate their ownership of the wallet and its contents. This can be achieved in two ways. Firstly, you can keep a detailed record of all transactions where cryptocurrencies are bought, traded, or sold so it matches with the bank account that is linked to the SMSF. Secondly, the beneficiary owner/s of the SMSF account should be stated in the Deed of Trust or a similar document.

Some additional actions that can be implemented to clearly demonstrate ownership of digital assets include:

• The email address of the crypto SMSF account must be unique to any person or business account.
• Outgoing AUD transfers made from the linked bank account must match the deposits in the SMSF account.
• All records must be clean and organised to show that crypto transactions align with the Trust Deed.

Sole purpose test

An SMSF must be operated with the sole intention of providing retirement funds for its members and Trustees. Cryptocurrencies, or other investment assets, cannot be used for personal means such as trading as this breaks the sole purpose test.

Separation of assets

Akin to the sole purpose test, a crypto SMSF must be entirely managed separately from any personal super funds or business investments held by its Trustees. This includes the separate storage of crypto assets from other funds and the trading of digital assets for personal purposes. This is why a new SMSF account is required to be set up by Australian crypto exchanges that provide SMSF services.

Valuing crypto assets

Digital currencies held in your SMSF need to be appropriately valued to ascertain their market worth for taxation purposes. The market worth of digital assets must be assessed by a qualified and independent valuer in accordance with ATO valuation guidelines for crypto.

Essentially, the market value of your digital currencies will be determined based on their market value as of 30 June of that financial year. However, alternative evaluation methods may be acceptable as long as they satisfy the following:

• The alternative method does not contradict the approach taken by ATO guidelines.
• A different market evaluation was used for the same capital gains event.
• The valuation is based on objective data that is backed up with demonstrable evidence.

Country of residence

All Trustees and members associated with a crypto SMSF must reside in Australia. Not satisfying this requirement may be in breach of regulations.

Crypto SMSF taxation

One of the main reasons why more and more Australians are using their SMSFs to invest in Bitcoin and other cryptocurrencies is the attractive tax structure. Whenever a capital gains event is triggered, or financial gain is realised, they will be subject to Capital Gains Tax (CGT).

CGT applies to cryptocurrencies when any of the following capital gains events are triggered, and must be reported to the ATO:

• The market value of digital currencies positively appreciates over time.
• The trading of one digital asset for another result in an increased overall market value.
• Selling crypto back to AUD for a profit.

If the market value of SMSF-held cryptocurrencies depreciates then they are not eligible for taxation and are instead considered as the base cost of the digital asset itself.

The concessional tax rate for SMSF-held digital currencies is 15%. If cryptocurrencies are held in your SMSF for a term longer than 12 months then the tax rate is 10%. The tax rate is higher if your cryptocurrencies are held for a period of fewer than 12 months.

Further reading: Is crypto taxed in Australia?

The Costs Of A Crypto SMSF

Depending on which professional you go to, the initial cost to set up a crypto SMSF in Australia generally ranges from $2,000 to $4,000. The fixed fee typically covers the creation of the Trustee company, ATO supervisory levy, and preparation of the Trust Deed. Fees and charges that you should take into account include:

• Trading fees to buy crypto with AUD.
• Professional service fees for legal and financial advice.
• Accounting and taxation fees.
• Third-party audit fees – approximately $500.
• Australian Securities and Investments Commission (ASIC) levy of $56.
• The ATO supervisory levy. This is an ATO-mandated fee of $259 that must be paid in advance of the next financial year.

In terms of running costs, a good rule of thumb is 6% of your total SMSF value. For most Australians, running your own SMSF may cost around $4,000 to $6,000 a year, noting that the majority of costs will be associated with professional service fees.

4 Best Crypto SMSFs In Australia: 2023 Reviews

1. Swyftx – Best overall SMSF option

Swyftx is a leading cryptocurrency exchange that has been providing reliable services to Australians since its inception in 2019. Despite being a relatively young trading platform, Swyftx has managed to capture the mainstream Australian audience with its innovative and beginner-friendly features such as a wallet where you earn interest on crypto, a free demo mode to practice trading, and excellent customer support.

The AUSTRAC registered platform now sports an impressive customer base of over 600,000 Australian investors and traders who are able to buy Ethereum (ETH) and over 320 other digital currencies. There is even a free $20 BTC bonus when using a Swyftx referral code.

Swyftx is an excellent choice if you want to bring your existing SMSF across or create a new one to invest in crypto. The popular platform has partnered with New Brighton Capital, an Australian super fund specialist, to deliver SMSF support to its customers.

Swyftx is our overall best SMSF platform due to a number of factors. These include its highly competitive trading fee of 0.6% which provides outstanding value for money. Contacting the Swyftx Over-The-Counter (OTC) desk might yield even cheaper fees. In addition to economically buying popular SMSF assets including Bitcoin and Ethereum, you can apply a number of limit orders to your trades. These can all be accessed on the supremely well-designed interface that comes with a free demo mode.

Once you buy your cryptocurrencies, you can stretch their performance even further by placing them into an interest-earning wallet where you can receive interest payments of up to 80% Annual Percentage Yield (APY). In addition to its stellar crypto features, Swyftx has bank-like security features and has an unblemished track record since it was founded.

Overall, Swyftx is unrivaled in its ability to provide retirement investors with value for money and peace of mind. If we were to pick out a downside, it would be the starting trading fee of 0.6% which is slightly higher than Digital Surge and Independent Reserve. (both 0.5%). For more information on fees, read our full Swyftx review.

2. CoinSpot – Best option for SMSF security

CoinSpot is one of the pillars of the Australian crypto market. Founded in 2013 and making it one of Australia’s longest-serving crypto trading platforms (and without any security breaches), CoinSpot offers a highly secure and reputable place to buy over 370 digital currencies.

CoinSpot has been supporting SMSF investors for some time. Like Swyftx, the popular crypto platform has partnered with New Brighton Capital. One of the highlights of their SMSF offering is the seamless onboarding process as well as its ongoing account management from its team. Other features that will benefit you include the OTC desk for large trade, the integrated tax reporting and portfolio tracking tools.

However, the real advantage is knowing that your funds and digital retirement assets are safe. In terms of security and the integrity of its information systems, CoinSpot goes beyond what other Australian crypto exchanges undertake. An example is its internationally recognised ISO 27001 accreditation. The accreditation means that CoinSpot needs to adhere to the highest standard of security for its information systems and how to protect data. There are only a couple of other platforms that have attained this standard.

Using CoinSpot’s Instant Buy/Sell feature to add crypto to your SMSF is far from ideal given the expensive 1% fees. If you want better value for money, then either placing market orders on the Exchange or going through the OTC desk will mean vastly cheaper fees of 0.1%. Whilst its 0.1% fees are lower than Swyftx, the user experience is harder to manage and less enjoyable as explained in our Coinspot review that you can read here.

3. Independent Reserve – Reliable crypto platform for SMSF

Independent Reserve’s SMSF support is one of the most reliable and robust services in Australia. Independent Reserve is not as well known as the likes of Swyftx or CoinSpot, however, it has been quietly providing excellent support to crypto super investors since 2013. Today, it holds over 8,000 crypto SMSF accounts according to its website.

Independent Reserve has been providing SMSF services for a long time and its knowledge and understanding of what is required from a regulatory standpoint and delivering those services are obvious. It fully understands how the sole purpose test as well as the implications of external audits and how you can make them simpler. The tax reporting tools that it provides help to ensure your SMSF remains compliant. To see how it compares, here’s our list of the best crypto tax software in Australia.

Independent Reserve is one of the cheaper SMSF options on our list, with trading fees that start at 0.5% and can be reduced to as low as 0.02% depending on your 30-day trading volume. On top of this, you can apply limit orders and Dollar-Cost-Averaging (DCA) to your trades which is something that the other SMSF platforms don’t provide.

All in all, Independent Reserve is the quiet achiever in crypto SMSFs. However, it boasts an impeccable track record of security and regulatory compliance. To learn more about the pros and cons, read our extended review on Independent Reserve.

4. Digital Surge – Good crypto SMSF platform for beginners

Digital Surge is a relatively new cryptocurrency brokerage platform that offers Australians easy access to over 310 digital assets. Compared to the other SMSF platforms on this list, Digital Surge is almost a like-for-like swap.

The AUSTRAC registered crypto platform has similar trading fees that start at 0.5% and can be reduced further depending on your trading volume over the past 30 days. The onboarding process is also fairly straightforward. Although Digital Surge implements bank-like security controls, it hasn’t been around for long to build a strong track record. Nonetheless, it doesn’t mean that it isn’t a viable option. In fact, it’s a great option for beginners further to our review of Digital Surge’s features.

Conclusion

Investing in cryptocurrencies as part of SMSFs is slowly increasing in popularity with the two largest digital assets in terms of market cap, Bitcoin and Ethereum, being the most popular digital assets for investment. In response to growing demand, Australians now have more choices when it comes to choosing an SMSF trading platform.

In almost all cases, crypto platforms offer very competitive trading fees to make sure your dollar goes further, tools to help with regulatory compliance (noting that you are solely responsible for this), and strong security for peace of mind.

Frequently Asked Questions

Can the ATO track cryptocurrencies?

Yes, the ATO can track your cryptocurrency portfolio using a data-matching program in conjunction with Australian cryptocurrency Designated Service Providers (DSP). Since 2019, the ATO has had access to the information you submit as part of the Know-You-Customer (KYC) process. If you’re a crypto investor or trader, then the ATO may notify you to report all transactions through your MyGov account.

Can you invest your superannuation in Bitcoin?

Yes, the ATO regards Bitcoin and other cryptocurrencies as property assets that can be invested as part of your superannuation fund. Digital currencies are not prohibited from being invested in as long as the Trust Deed allows them to be acquired as part of the SMSF strategy.

Which crypto exchange is best for SMSF?

After reviewing several Australian crypto exchanges, Swyftx is our #1 SMSF choice for investing in crypto such as Bitcoin and Ethereum. The AUSTRAC registered platform provides a secure and regulated environment for you to build a retirement portfolio with its competitive trading fees and excellent support team.