Can I buy cryptocurrencies in my self-managed super fund?

Created on February 27, 2018 2:04 pm

Bitcoin and other cryptocurrencies have been around for many years but in recent months they’ve been a major focus as their daily values go up and down more often than the highest rollercoaster in the world, The Kingda Ka in New Jersey.

So, whilst some investors are reaping astronomical gains on these virtual currencies, can they be purchased by a SMSF? Here are some important points to consider should you be thinking of diversifying your fund’s investment portfolio into cryptocurrencies:

Does my trust deed permit this type of investment?

As with all SMSF investments, they must be permitted by your fund’s governing rules so always check your trust deed first.

The SuperCentral governing rules do permit investments in digital currencies.

Sole purpose test

Provided an investment in an asset is permitted by the superannuation legislation, the fund’s trust deed and investment strategy, then generally any investments are permissible. As long as the investment is undertaken for the purpose of providing retirement benefits to the fund members, or to their dependants should a member dies.

Potential compliance and audit breaches

Whether a SMSF trustee trades, as opposed to buy and hold, digital currency like Bitcoin potential compliance risks may arise when:

  • funding the purchase eg. can contributions be accepted? Or has the fund borrowed money?
  • are there any related parties to the transaction?
  • transferring of existing Bitcoin from a member to the super fund is not permissible
  • hedging of cryptocurrencies when a “wallet” is established through an online exchange to buy/sell as a charge is placed over assets of the fund which is not permitted
  • proof of ownership eg. what happens when the member whom purchases the digital currency dies and their private key and password to access the online account cannot be obtained?
  • defrauding of SMSF assets should the fund’s account be hacked.

Should a fund hold investments in digital currencies, such areas will be investigated by the auditor and sufficient documentation will need to be provided by the trustees to confirm such risks have been mitigated.