How to Set Up a SMSF to Invest in Cryptocurrency

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What is an SMSF?

SMSF stands for Self Managed Superannuation Fund and is a structure unique to Australia as a Do-It-Yourself superannuation option. Unlike your standard industry super funds, an SMSF is instead managed directly by its members who have a great deal of autonomy when it comes to decision making.  An SMSF may have up to 6 members with the most common being two member funds with spouses choosing to invest together. 

Many members choose to open an SMSF as it allows them to directly select and place their own investments with fewer restrictions on investment class, value or platform.  This means SMSFs are generally better placed to invest in cryptocurrencies than their regular counterparts that tend to have exposure only to traditional asset classes. 

How do I establish an SMSF to invest with UpTrade?

UpTrade has partnered with SMSF Australia to assist investors looking to utilise their superannuation to invest in cryptocurrency through an SMSF.

SMSF Australia is a SMSF focused accounting provider offering full-service assistance to clients directly as well as by supporting smaller accounting firms directly through their white label product. Their Australian based Directors are all SMSF Specialist Advisors who complete the accounts for over 1,800 SMSFs a year, many of whom invest in crypto.

SMSF Australia has an online application process which is designed to be as simple and straightforward as possible.  To get started you will need to have the following:

• Tax file numbers of each person who will be a member of the SMSF
• A scanned or photographed copy of each member’s driver's license, passport or similar photo ID
• The name you would like to use for the SMSF.  This can be something as simple as “Trump Super Fund” through to the more creative “Crypto to the Moon Super Fund”
• Director Identification Numbers (DINs) for each member

DINs are required for all company directors and may be applied for using the following link: https://www.abrs.gov.au/director-identification-number.  As your SMSF will be established using a corporate trustee (a Pty Ltd company) it is required for each member to hold one.  While this does mean an extra step at the setup stage, corporate trustees for SMSFs offer much greater flexibility, privacy and security then an individual structure does. 

The cost to establish your SMSF online with SMSF Australia is $2,000 + GST and includes all legal, accounting and ASIC costs along with one-on-one support throughout the setup process. Once you are made the decision to get started it usually only takes a few business days between completing the setup form and having documentation completed to open the bank account. As part of our setup fee SMSF Australia can also help you establish an ANZ V2 Plus bank account which is one of the most crypto friendly options out there! 

What should I know before setting up my SMSF?

All SMSFs are regulated by the ATO and have strict compliance requirements each year to confirm they are operating within the laws. To satisfy these requirements, the SMSF needs to complete and lodge Financial Statements and Income Tax Returns, which are externally audited each financial year.

By working together, UpTrade and SMSF Australia can handle the majority of this red tape for you - UpTrade handles all your investment reporting needs and SMSF Australia handles the accounting and technical side.

The annual cost for this service with SMSF Australia is $1,600+GST each year and also includes technical and administrative assistance from their experienced staff.  This fee also includes the cost of the independent auditor and does not restrict you from holding your crypto either in a wallet or directly on our exchange.

What happens after I establish my SMSF?

Once SMSF Australia has completed the SMSF establishment, you are now able open your SMSF bank account and trading account.  While there is no requirement as to which banks or account type your SMSF is required to use, many banks have restrictions limiting the dollar amount you can transfer to crypto exchanges or will prohibit the transfers completely.

As mentioned before one of the most crypto-friendly bank accounts is an ANZ V2 Plus account.  These are a specialist account and are only able to be opened by approved providers.  SMSF Australia is an approved provider for ANZ V2 accounts so will be able to arrange one as part of their establishment service.  Alternatively, you will be able to open your own account directly with the bank of your choosing.

Once the bank account is open your existing superannuation will be able to be transferred to the SMSF which is again something SMSF Australia will support you to achieve included in the setup cost. 

UpTrade will then be ready to open an SMSF account for you – ready for you to purchase the coins or tokens of your choosing!

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Frequently Asked Questions

Is it really that easy to set up an SMSF and invest in crypto?

With the right team assisting you it certainly can be!  With UpTrade’s trading platform, concierge staff, specialist knowledge and research you will have the tools at your disposal to handle your investments.  With SMSF Australia’s accounting expertise and crypto experience you will have the confidence in knowing that compliance and reporting requirements are under control.

How do Investment Strategies work?

All Self-Managed Super Funds must have a compliant investment strategy which the auditor will check each year but will not comment on whether it is good or bad, only compliant or not. SMSF Australia have worked with our audit partners to develop a template for clients to adapt and use that will allow for Crypto investments along with a broad range of other investment options and which they provide for free to clients as part of the setup process. For more information about SMSF Investment Strategies checkout the link below: https://smsfaustralia.com.au/smsf-investment-strategy/

Will I need to pay for an Electronic Service Address for the Fund?

All SMSFs are required to have an electronic service address (ESA) which connects the SMSF to the government systems and allows for rollovers from existing industry funds and employer contributions. This ESA is basically a government messaging service. SMSF Australia provides one for free to clients which is “smsfdataflow” which links into the Class Super software ensuring that your fund will be compliant from day one. This ESA talks via the governments SuperStream system allowing the government to track contributions etc in real time. For more information about how the mandatory ESA system works checkout our blog on topic: https://smsfaustralia.com.au/what-is-the-electronic-service-address-esa-for-my-smsf/

Am I required to diversify my SMSF investments? 

Although it is often advisable to look at diversification as part of an investment plan there is no legal requirement to diversify into a particular number of asset classes. It is perfectly legal for a trustee to have a holding of 0% through to 100% of their fund in an asset class where that be cryptocurrencies, direct property, bullion, etc. The only requirement it that must match your investment strategy and be permitted under your SMSF Deed, both of which will be setup to allow you full flexibility as part of the SMSF Australia setup process. 

How much will an SMSF with Crypto Investment cost long term?

Once the SMSF is setup it is required to complete annual financials, tax returns and complete an independent SMSF audit every year. The SMSF Australia model is to have a simple flat fee for clients depending on their investments covering the annual accounting work, provision of your electronic service address, the annual tax return, the registered office and ASIC agency work and the independent audit. The all-inclusive cost is on our website under our pricing table.  For funds with Crypto Investments via UpTrade the annual cost is $1,600+GST per annum.

Do I need to buy life insurance in my SMSF?

Insurance is not a requirement for an SMSF but is often advisable and something that members value having within their fund. Generally, SMSF Australia sees two options for clients moving to an SMSF structure. First, leave a balance in the current industry fund to keep your existing insurances in place as these are known as pooled insurance products which are not replicable in an SMSF environment. The second is to engage with a financial planner to apply for a personal insurance product in the SMSF however, the cost and complexity will depend on any pre-existing health issues etc. A lot of the time clients go with option one leaving a balance in their existing fund while they investigate the costs of private insurance. They also have a link below for some more detailed information: https://smsfaustralia.com.au/smsf-insurance-explained/

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