We have all heard about Bitcoin investments. In fact, today cryptocurrencies are the new way of making assets and Bitcoin is the most well-known name in this regard. Bitcoin is in fact the first cryptocurrency, launched in the year 2009, and since then it has become a popular investment asset for many people. Along with investing, you can use cryptocurrency for purchasing goods and services and for trading. There was a time when cryptocurrencies were not taken seriously by investors or even economists. But with time, cryptocurrencies have been accredited as a source of an alternative asset by regulators and SMSF investors. Here, we will discuss in detail about how you can make Bitcoin investment through SMSF.
Different types of cryptocurrencies
Sometimes a particular name gets associated with representing a whole range of products. Bitcoin is probably the best example of this. When we talk of cryptocurrency, we only think of Bitcoin, and many people have an idea that Bitcoin means cryptocurrency. However, the fact is that there are many cryptocurrencies in the market, and Bitcoin is just one of them. Apart from Bitcoin, all the other currencies are referred to as altcoins.
With the help of an SMSF, you can choose the investment strategy, which seems most suitable for you. You can also specifically choose the cryptocurrency in which you want to invest.
SMSFs and cryptocurrency investment strategies
- SMSF stands for self-managed super funds. With the popularity of Bitcoin, innumerable SMSF investors are making the addition of cryptocurrencies to their portfolios as a kind of investment, instead of using it as a form of currency per se. As cryptocurrencies have decentralized nature, investors are divided. Trustees of SMSFs must remain aware regarding the regulations and the risks which are associated with holding cryptocurrency in an SMSF.
- With an SMSF, ensure that your investment strategy crosses the main purpose test – one can only reap the benefits from the investment post-retirement. This directly implies that when you buy cryptocurrencies, the purchase happens under your fund and never under your account. It is considered as a golden rule when you are investing in cryptocurrencies with an SMSF.
- When it comes to SMSF, purchase and hold situations, a HODL approach is great for audit purposes, instead of trading actively. Though many investors do some trading, many people also prefer day trading for an SMSF. This is because over-complications might arise in the accounting and audit process as multiple transactions take place.
Maintaining compliance of cryptocurrencies – very important
When it comes to SMSF, compliance is the main key. Mentioned below are some important considerations for funds auditing, which is involved with cryptocurrency:
- Ensure all the ledgers, accounts and transactions must solely operate under the title of the SMSF and not under any individual name. It is not possible to purchase or transfer any cryptocurrency under one’s name.
- It is very important and kind of mandatory to take a screenshot of your cryptocurrency investment portfolio as it is on June 20th, at 6.00 pm AEST. There should be complete details of all the coins that you have purchased or sold and all the transactions that you have done in that particular financial year.
Valuation of cryptocurrencies
Any assets, which are held by a super fund (SMSF), will have a valuation as per current market value. SMSF trustees should know and be aware of the fact that any kind of cryptocurrency, which is held by an SMSF, will be adjusted for reflecting the market value in the relevant financial year.
Tax consequences when making Bitcoin investment through SMSF
All cryptocurrencies, including that of Bitcoin, are generally considered as an asset. When such a currency is sold at a profit, it means that capital gains take place. Therefore, capital gains tax might be levied on the same. However, if there is a loss in investment, the capital loss is triggered. Interestingly, if Bitcoin is sold, the members of the SMSF are in the pension phase, and there are gains from the investment, the gain is exempted from any kind of tax consequences.
Bitcoin investment can be performed through SMSF. However, they belong to the high-risk category that demands high technical knowledge and expertise. Before any investment, it’s prudent to seek financial advice or consultancy to deal with SMSF.
If you want to buy Bitcoin under your SMSF, please contact [email protected]pt.io now!