Adding crypto to your self-managed super fund? 3 things to keep in mind - Kalkine Media

March 05, 2022 01:04 AM AEDT | By Daniel Paul Johns
Follow us on Google News:

Highlights 

  • While Australian super funds don’t yet invest in cryptocurrency, individuals with self-managed funds can include digital assets if they so choose.
  • Despite its short-term volatility, crypto’s long-term potential is, no doubt, a feature that attracts many investors.
  • Cryptocurrency is largely a speculative asset and the ebbs and flows of the market are mysterious to say the least.

It’s amazing how quickly things change in the financial space. Five years ago, the idea of including cryptocurrency in your superannuation would’ve seemed absurd. Today, the idea of putting crypto into a retirement fund no longer seems that farfetched, thanks to the emergence of digital assets and their move further into the mainstream.

While Australian super funds don’t yet invest in cryptocurrency, individuals with self-managed funds can include digital assets if they so choose.

If you’re looking to include crypto in your self-managed super fund (SMSF), there are some things you might want to consider.

Volatility of cryptocurrency

It’s no secret that the prices of cryptocurrencies fluctuate wildly when compared to the share market. Take Bitcoin, for example, which is the largest crypto by market cap. Over the past 12 months, Bitcoin has crashed twice, losing around half its value each time. At the time of writing, Bitcoin sits at around US$44,000. Just last week, however, that price was around US$35,000.

 Bitcoin, SMSF

Image Source:  © Majesticangel521 | Megapixl.com

Despite its short-term volatility, crypto’s historical performance along with its long-term potential is no doubt a feature that attracts many investors. In August 2013, Bitcoin was priced at a measly US$100. By 2017, it had surpassed US$1,000. By 2019, US$10,000. Then in 2021, the price skyrocketed to an all-time high of US$68,500.

It’s a similar story with many of the top ranked tokens, like Ethereum and Solana, which share similar long-term trajectories.

The timing of your fund’s maturity

Short-term volatility is still something to consider for holders of SMSFs because although historically crypto goes up over time, we’ve seen instances in the past where a particular cryptocurrency has lost half its value in the blink of an eye. Therefore, the timing of when to withdraw your super comes into play because the last thing you want is for the market to crash the day before your super fund matures.

Predicting a market crash, of course, is no easy task. Cryptocurrency is largely a speculative asset and the ebbs and flows of the market are mysterious to say the least.

For example, many have speculated that the most recent downturn, which started after November 2021, was caused by increased regulation, increased inflation and the anticipation of rising interest rates. But because the crypto market doesn’t tend to follow the trajectory of any other asset class, it’s difficult to pinpoint exactly when the market is going to pique or dip.

To add to this, many financial advisors are not permitted to to offer advice on digital assets, so it’s left largely up to the owner of the fund to predict any wild downturns in the short term.

Tax Requirements

Investments in crypto for super funds are subject to personal tax. Any gains made through cryptocurrency are therefore subject to capital gains tax (CGT) and calculated in Australian Dollars after the crypto has been converted to fiat currency.

It can be difficult to calculate the tax on cryptocurrency, so it’s advised that you visit a reputable tax agent.

Bottom Line

The soundest advice, when it comes to including crypto in your SMSF, is the same advice for anyone wanting to invest in crypto: keep your portfolio diversified. Even the most pro-crypto experts advise that crypto should not account for more than 5% of your total assets.


Disclaimer

The content, including but not limited to any articles, news, quotes, information, data, text, reports, ratings, opinions, images, photos, graphics, graphs, charts, animations and video (Content) is a service of Kalkine Media Pty Ltd (Kalkine Media, we or us), ACN 629 651 672 and is available for personal and non-commercial use only. The principal purpose of the Content is to educate and inform. The Content does not contain or imply any recommendation or opinion intended to influence your financial decisions and must not be relied upon by you as such. Some of the Content on this website may be sponsored/non-sponsored, as applicable, but is NOT a solicitation or recommendation to buy, sell or hold the stocks of the company(s) or engage in any investment activity under discussion. Kalkine Media is neither licensed nor qualified to provide investment advice through this platform. Users should make their own enquiries about any investments and Kalkine Media strongly suggests the users to seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice), as necessary. Kalkine Media hereby disclaims any and all the liabilities to any user for any direct, indirect, implied, punitive, special, incidental or other consequential damages arising from any use of the Content on this website, which is provided without warranties. The views expressed in the Content by the guests, if any, are their own and do not necessarily represent the views or opinions of Kalkine Media. Some of the images/music that may be used on this website are copyright to their respective owner(s). Kalkine Media does not claim ownership of any of the pictures displayed/music used on this website unless stated otherwise. The images/music that may be used on this website are taken from various sources on the internet, including paid subscriptions or are believed to be in public domain. We have used reasonable efforts to accredit the source wherever it was indicated as or found to be necessary.



Top ASX Listed Companies

We use cookies to ensure that we give you the best experience on our website. If you continue to use this site we will assume that you are happy with it. OK