Cryptocurrencies are always in the news, so much so that it’s almost impossible to not talk about them all the time. It doesn’t matter if we’re talking about record prices or a new multinational company that accepts crypto payments. They’re quickly becoming a more common thing. Even big banks are buying them, which means more and more people are taking them seriously as a way to make money, like they should.
There are problems with crypto, but not all of them are good ones They can be hard to understand, there is a lot of risk, and it can be hard to find ways to get into the market. If you use an SMSF to invest in cryptocurrencies, you don’t have to deal with a lot of the problems that come with them. A self-managed super fund may seem like an odd place to invest in a new asset class like crypto, but here are five reasons why you should do so:
1. Tax Efficiency
The tax laws that apply to investing in Bitcoin or any other cryptocurrency can help you if you set up a self-managed fund for it. All cryptocurrencies are CGT assets, but the rate for those held by an SMSF for more than a year is just 10%, which is a third less than for those held for less than a year. This means that those held for more than a year get a third discount.
As a bonus, for sales of cryptocurrencies that are used to directly find the pensions of SMSF members, any capital gains are not subject to CGT at all.
2. Separation of Ownership
An SMSF must keep its own money and assets separate from those of its members. This is very clear in the rules. With cryptocurrencies, this is a lot easier than with other types of money. By setting up a separate cryptocurrency wallet for the self-managed super fund, its money is kept completely separate from the rest of the fund’s money. It’s not just that auditing is easy because cryptocurrencies are public and all transactions are recorded on the blockchain, which makes it easy to do.
As we have seen in recent times, unexpected events can cause big changes in the value of assets. The assets can fall in value as quickly as they can rise. We saw this happen in 2020, when all traditional assets were affected at the same time. Having an SMSF for crypto can help protect against this Cryptocurrencies, on the other hand, aren’t connected to traditional markets, and they saw record highs even as other assets lost value.
4. A stake in the Future
A cryptocurrency is here to stay, and it will be for a long time. With big banks, hedge funds, and big companies investing a lot of money in the industry, they aren’t the only ones who do this. Cryptocurrency is now legal tender in some countries. Even PayPal, which is the world’s most popular payment service, is getting in on the act. In some countries, crypto can be used to make payments. Ethereum investment and other crypto assets are taking a stake in the future, with crypto sure to be seen as a valuable asset in the future.
5. Huge Potential
Technically, it’s important to know how to set up a crypto self-managed super fund. But the best reason to do this is how much room for growth you can find. Whether you’re investing in Bitcoin, Ethereum, or one of a dozen or more other coins that have shown growth, few assets can match the performance of cryptocurrencies. In 2021, the value of Bitcoin alone has gone up by 65%. Traditional assets, like gold, can’t compete with that kind of power.
SMSF for crypto opens up a new market that has a lot of room for growth, but one that also doesn’t work the same way as traditional investments. It’s a good place to diversify.
It sounds good. Don’t be afraid to call us at New Venture Wealth! Here, you can reach us.