Cryptocurrency has grown massively in popularity since its inception, adding to the complexity of self-managed super funds. Before jumping in, you will want to make sure you understand self-managed super funds (SMSF) and consider if you are going to start a virtual wallet for cryptocurrency.
Cryptocurrency and SMSF
Self-managed super funds have been available for Australians for over twenty years now, and they are popular with people who want to create their investment portfolio. Cryptocurrency, such as Bitcoin, was introduced just over ten years ago. Now people can invest their virtual money in their SMSF, but first, you must fully understand cryptocurrency.
Bitcoin and similar are forms of digital currency and can be used to make payments online to companies who accept that form of compensation. Cryptocurrency does not have any authority overseeing it. Instead, it is a peer-to-peer system. You will be required to keep accurate records of transactions, and your wallet is password protected.
Self-Managed Super Fund Considerations
There are three main rules that all SMSF accounts must follow.
1. You must have approval from the trust deed to make a purchase.
2. Any purchase must be in accordance with your investment strategy.
3. SISA and SISR requirements must be met.
Outside of these three rules, you will want to make sure that you have your account set up for the purpose of retirement funds. It is best to talk to a financial advisor when creating your investment strategy, so your cryptocurrency will diversify the funds. They will also counsel you on what auditors look for to make sure you document and report everything correctly.
Setting Up a Cryptocurrency SMSF Account
Thankfully, creating a crypto self managed super fund account is simple and straightforward. You will need to make sure you have copies of your deed (including proof of all trustees), identification of all the beneficiaries, bank details, and then the trust’s ABN/CAN. The government will verify the documents before clearing your account for trading. While the establishment of the account is uncomplicated, securing that account is more complex. When you are looking at investing large amounts, you will want to focus on the following aspects of security:
1. Strong passwords – Consider using passwords that are 12 characters long and a mixture of capital letters, lowercase, numbers, and symbols. Do not store your password anywhere for your virtual wallet that is not also password protected (such as Last Pass).
2. When you create an account, you will have a backup password phrase comprised of twelve to 24 words. Place this information somewhere safe offline, such as a password keeper book. These backups allow you into your account if you have lost the device your virtual wallet was created on.
3. Always practice safe internet safety – Make sure you do not click on any unknown links and do not allow other people to access your computer remotely. It is also wise to update your system regularly and clear the cache after closing each session.