Bitcoin is becoming more popular in an SMSF environment as crypto investments are becoming more mainstream. When investing in Bitcoin, Trustees should make sure their SMSFs are compliant with guidance as we explain below.
If an SMSF invests in cryptocurrencies, Trustees need to ensure that the Fund’s assets are held separately from personal assets and the SMSF must have a clear ownership of the cryptocurrency. This means that statements must be in the name of the SMSF. For an example of the cryptocurrency holding statement, please see here:
Sole Purpose Test
SMSFs are required to operate for the sole purpose of the Fund. This means that each investment made or action undertaken by the SMSF should be for the sole purpose of providing retirement benefits or death benefits to the Beneficiaries of the SMSF.
This requirement might be addressed by ensuring the SMSF’s Bitcoin are held at a public IP address and stored in a secure manner. Regular movements between different public addresses could cause difficulties to identify the ownership of the investment. Movements between the SMSF’s public IP addresses and a Member’s address might be regarded as a related party transaction and breach the sole purpose test.
Related Party Transactions
Bitcoin cannot be used as an in-specie contribution. In addition, an SMSF cannot purchase Bitcoin from its Members or related parties as it is neither a listed security nor a commercial property. Virtual currency must be purchased with cash from the SMSF bank account to illustrate the SMSF is the owner of the Bitcoin or other virtual currency.
Members of an SMSF can take lump sum payments by way of virtual currency transfer if they meet a condition of release. Please note pension payments can only be taken as cash payments. Virtual currency cannot be used for this purpose. For more information on virtual currencies, follow this link.
Bitcoin Providers
Trustees can use a provider of their choice. As a starting point, you can consider using one of the following providers.
Digital Surge
If you are looking for a Bitcoin provider for your SMSF, consider using Digital Surge.
Digital Surge is an Australian cryptocurrency exchange that lets you buy, sell and trade Bitcoin and other cryptocurrencies, with support for SMSF accounts so you can hold and manage crypto within your SMSF.
For guidance on the steps and bank account pitfalls to look out when investing in Bitcoin via an SMSF, follow this link.
Hardblock
When opening up a Bitcoin account for your SMSF, you can consider using Hardblock as a provider.
HardBlock offers dedicated SMSF accounts, guidance through setup and compliance considerations, and simple tools to buy and securely hold Bitcoin.
The Bitcoin Adviser
Another Bitcoin provider that you can consider using is The Bitcoin Adviser.
The Bitcoin Adviser is a Bitcoin-only advisory firm that helps clients allocate to and securely hold Bitcoin as part of a broader investment strategy. They can help secure your Bitcoin, manage it with confidence, and ensure it’s passed on safely.
For more information, you can view their website below:
Coinstash
Exclusive Offer for SMSF Warehouse Clients: Get a $200 Bitcoin welcome bonus when you sign up and create an SMSF account on Coinstash and use the referral code “smsfwarehouse”.
Coinstash is Australia’s leading crypto SMSF investment platform, designed to make crypto SMSF investing simple,
compliant, and efficient. Here’s why Coinstash is the preferred choice for SMSF investors:
Same-Day Onboarding: Get started quickly with personalised onboarding consultations and same-day account setup.
1,000+ Coins Listed: Build your SMSF portfolio with access to the largest variety of coins in Australia.
Portfolio Tracking: Monitor your SMSF investments with real-time market updates and an easy-to-use tracking interface.
Tax-App Integrations: Seamlessly sync your transactions with leading third-party crypto tax apps for hassle-free reporting.
Detailed EOFY Reports: Receive comprehensive transaction reports to ensure your SMSF remains fully compliant.
Independently Audited: Coinstash engages independent external auditors to review our financial statements annually in compliance with Australian Accounting
Standards.
To sign up with Digital Surge, click the button below:
Further Learning
If you would like to learn more about Bitcoin, see the training services offered from The Bitcoin Blueprint. The Bitcoin Blueprint’s focus is helping to assist individuals over the age of 40 with how to invest in Bitcoin in a secure and proper way.
For more information, see the link here: thebitcoinbp.com.
Tax Treatment
Bitcoin as an investment in an SMSF is taxed as a CGT asset. For more details on tax treatment of virtual currency in SMSFs, please see our page discussing Taxation of Bitcoin.