With its massive potential for growth and ability to sit outside traditional markets, mitigating some of the risks that we have seen recently where all traditional assets are impacted simultaneously, starting an SMSF for crypto makes a lot of sense.
However, for those new to the cryptocurrency markets, it can be a daunting prospect. Here’s a simple guide to get your self-managed super fund for crypto up and running quickly and easily.
Set up your SMSF
To use an SMSF for crypto trading, you need to set up your self-managed super fund. This is easy to do in just a few steps:
- Choose a structure – Will you use a corporate trustee, or will each member be a trustee in their own right?
- Obtain a trust Deed – This is the legal document for setting up and running your SMSF for crypto. Purchase directly from SMSF service providers or have a lawyer draw one up.
- Sign the Declaration- All members must sign to acknowledge you understand the benefits and obligations of the fund.
- Record Member’s TFNs – Each member’s tax file number must be recorded to accept personal contributions and ensure government co-contributions are accessible.
- Register with the ATO – Each fund must be registered with the Australian Tax Office within 60 days. To be eligible for the superannuation tax concessions, you must elect for your fund to be regulated, and apply for an Australian Business Number at the same time.
- Open a Bank Account – Finally, for the fund to be able to accept the cash contributions used to fund your crypto purchases, set up a bank account in the names of the fund’s trustees, to ensure money is kept completely separate from your personal or business assets.
Create an account at a Cryptocurrency Exchange for the SMSF
Cryptocurrencies are bought and sold through an exchange, and that means your self-managed super fund for crypto must have access to an account. There are a variety of options with exchanges some offering more features than others. Coinbase is the industry leader based in the USA and closer to home we have Coin Spot as Australia’s largest crypto exchange. There are many providers in this space so a little bit of research here will do you well as an exchange is essentially the bank for your crypt transactions.
Open a Crypto Wallet
To purchase any cryptocurrency at all, whether it is a Bitcoin investment, Ethereum investment or any other cryptocurrency, you need a place to store your crypto. The tool for this is called a crypto wallet, and when setting up an SMSF for crypto, creating a wallet just for the fund is the first essential step.
There are different types of wallets available and choosing the right one can make using an SMSF for crypto much simpler. When you open an account with an exchange you will usually find that they have a wallet attached to the account. These are useful when buying and selling, and most have advanced security measures in place to keep funds safe, however, for the ultimate in safety, and SMSF compliance, an offline, hard wallet is recommended.
These are physical devices that store your keycodes and are entirely independent of the internet, for maximum security. This approach, keeping your crypto completely independent, is also perfect for reporting and compliance.
With an exchange account and a wallet to store crypto safely, your self-managed super fund has the tools to begin Bitcoin investment or any other cryptocurrency you choose. However, that is not all you need to remember. An SMSF is subject to very tight regulation, whatever the investment, and must follow guidelines for reporting, which includes asset valuation following ATO rules.
With a dedicated wallet, the SMSF for crypto keeps those assets separate from member assets as needed, but reporting should include the amount bought, and the value at purchase of every crypto asset in the wallet. Because crypto prices can be volatile, the actual value of those assets can vary considerably as they are held. For reporting purposes, the price of each crypto asset on 30th Jun should be used to calculate member balances and ensure compliance with regulations.
Everything in Place
With everything in place, your self-managed super fund for crypto can begin Ethereum investment or whatever cryptocurrency you choose. The process is simple, buy with Australian dollars via the exchange, and transfer to your physical wallet.
What strategy you use, the crypto you purchase and so on, will be done to your own market analysis. Whether Bitcoin or Ethereum investment or any other crypto, there is incredible potential for creating growth with crypto assets.
Sound good? Think you might need help through the process?
Then don’t hesitate to reach out to us at New Venture Wealth! Contact us here