Is it possible for an SMSF to invest in digital assets such as cryptocurrency or non-fungible tokens? If so, how do they do it? It’s a question that is often asked by those looking for alternative investments for super funds.
Can An SMSF Invest In These Assets?
The simple answer to that is yes, but only if all of the rules for the SMSF are complied with. These rules apply in exactly the same way to any other kind of SMSF investment (whether it’s an NFT, a holiday house or a parcel of shares in a listed company).
Does Your Trust Deed Allow For It?
While the answer to this question is most likely to be a ‘yes’, there have been instances of deeds accidentally not allowing for it. For example, a specialist-drafted cryptocurrency deed that had been written poorly enough, it actually did the reverse of what was intended. The fund as a result was not able to invest in cryptocurrency. The trust deed is thus a concern for accountants like us, and so any amendments that may need to be made you will be informed of.
Is The Asset Class Allowed In Your Investment Strategy?
Once the trust deed is satisfied, your investment strategy needs to be examined to ensure that this type of asset class is allowed. A new investment strategy may need to be drafted in order for this to be allowed. It will now need to mention the amount of the digital asset that you wish to invest in and why.
Are There Any Special Considerations For The Digital Assets?
Some cryptocurrency trading sites may only allow individuals to trade. This could prevent the trustee’s name from being the owner of the assets. In this case, the issue may need to be addressed through certain legal documents. This crypto trading will also need to be kept separate from your personal financial affairs, lest you breach SMSF laws and regulations.
You will also need to:
- Deal with your auditor to see what they require to confirm the ownership of your fund’s crypto or NFT assets.
- Ensure that it is your SMSF bank account that is linked to your cryptocurrency wallet.
- Ensure that there are no transactions intermingled with your personal bank accounts.
Most importantly, make sure that you have a conversation with us before you start buying cryptocurrency with the money held in your SMSF.
If you need assistance with your SMSF crypto investments, please feel free to book a free 15 minutes discovery call with Natalia here.