For the last couple of years, cryptocurrency has emerged as a lucrative investment tool. Due to its lucrative rate of returns, investors have turned toward cryptocurrencies. There are various ways by which one can invest in a digital asset. Still, in Australia, the most famous one is the self-managed super fund that helps individuals to explore various investment options.
Cryptocurrencies such as Bitcoin, Ethereum, Solana, and others give massive returns to their investors. Every Crypto SMSF Australia must have a strategy that outlines specific investment options. If one is planning to invest in a digital asset, then your fund must ensure crypto is listed in the assets included in your SMSF. Including cryptocurrency within your portfolio offers diversification, liquidity, or generating outsized returns.
Out of all the digital assets, the most familiar one is Bitcoin. It has become a hot commodity among various investors. You can use bitcoin to make payment provided the seller accepts the cryptocurrency. The Australian Taxation Office (ATO) issued a tax determination stating that Bitcoin is not a foreign currency and will be considered a CGT asset. Before you gear up and start investing in cryptocurrency, you must understand a few things beforehand.
As disused earlier, Cryptocurrencies are CGT assets, and SMSFs can buy, sell, and invest in them, provided they adhere to the rules and comply with the law. Because cryptocurrency is an asset, the SMSF trustee has to ensure they are permitted under the trust deed. When assessing the fund’s investment strategy, change it to include cryptocurrencies if digital support is not included. SMSF trustees and members should consider the risk of investing in such an asset class before putting their money in cryptocurrencies.
Trustees are required by the super laws to separate their fund’s assets from their assets. It must be stored and managed independently from the other investment classes. It includes verifying that the SMSF owns the support and that the fund must keep a distinct cryptocurrency wallet for the SMSF to make any transactions. SMSFs must value their cryptocurrency interests following the ATO’s rules. The value is calculated in Australian dollars and must be determined by a credible digital currency exchange. We all know that the value of digital currencies keeps on fluctuating. That is why the ATO accepts the 30 June closing value published on the website of a cryptocurrency exchange as the base value for calculating the fund amount.
The sole purpose test is the most important test as it is done to ensure that the SMSF will be managed solely to provide members with a retirement benefit and to ensure that the members are not getting any current benefits, such as rebates or commissions.
Conclusion
Cryptocurrency assets can be an excellent class for SMSFs to build retirement funds. However, evaluating the risk and the price volatility is also essential before including the cryptocurrency in your SMSF.
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Disclaimer- This content should not be considered financial advice and is for educational or informational purposes only.
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