Thinking of Investing in cryptocurrencies via your Self-Managed Super Fund?

Author: Tim Valtwies

It’s no doubt that in the last year cryptocurrency prices have been on a volatile ride. Even the most stable of cryptocurrencies, Bitcoin, which managed to fall in value by as much $2000 in one day in November last year has now gained more than 15% in the last week. Nevertheless, the popularity of cryptocurrencies continues to rise and with it comes the question of whether trustees of a Self-Managed Super Fund (SMSF) can and should invest in them.

Superannuation laws don’t stipulate what are permissible investments unless investing in related parties. Rather, they stipulate the need for SMSF trustees to devise an investment strategy taking into consideration diversification benefits, risk versus reward trade-offs and the level of liquidity required by the fund. Provided the cryptocurrency aligns with the fund’s investment strategy and is allowed under the fund’s trust deed, it is a permitted investment. However, in saying this there are several key considerations a trustee must consider before investing their SMSF monies into cryptocurrencies.

Is it allowed under the deed?

As outlined above, for any investment the SMSF deed must not preclude that investment from being made. A review of the deed will be important, whilst it may not specifically use the words cryptocurrency its worth understanding how a crypto currency would be classified. In the view of the ATO, cryptocurrencies are neither money nor a foreign currency. They essentially form part of a relatively new asset. For this reason, many trust deeds will not currently include a provision specifically allowing investment into this asset class.

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