SMSFs looking to ride the crypto wave
Growing interest in cryptocurrency investment in Australia has spread to the SMSF sector, with funds drawn to the appeal of capital gains and the opportunity to add new asset classes to their portfolios, says a cryptocurrency investment provider.
Cointree CEO Shane Stevenson said there’s no doubt that bitcoin is now being seen as an alternative to gold as a store of value, reflected recently by the rising price of bitcoin — currently hovering around the $75,000 mark.
He noted additionally the fact that cash, term deposits and bonds have less appeal because of the historically low interest rates, causing cryptocurrencies to become more attractive to SMSFs.
“How they invest, however, depends on whether they are in the accumulation or retirement phase, the fund’s risk profile and where fund members are at in their superannuation journey,” Mr Stevenson said.
“For those in the accumulation phase, we are finding investors and SMSFs are more prepared to take a bigger risk, as their focus is on growing their funds under management, while for those in the retirement phase, it’s a far more cautious approach, with cryptocurrencies typically a smaller percentage of their portfolios.
“Either way, when investing in the accumulation or retirement phase, the key theme we’re seeing is that the investment dovetails with the goals of the fund and aligns with their investment strategy.”
Under ATO guidelines, SMSFs can invest in crypto but should consider it good practice to ensure it is under the fund’s trust deed, is in accordance with the fund’s investment strategy and complies with the Superannuation Industry (Supervision) Act (SISA) and the Superannuation Industry (Supervision) Regulations (SISR).
Previously, it was flagged that with super funds now identifying on their tax return whether they are investing in these assets, it could be an indication that the ATO is aware that it is a challenging asset to hold in a super fund and that it is concerned that some funds may be getting it wrong.
Speaking on the requirements and challenges to choosing crypto as an SMSF option, Mr Stevenson said there are still hurdles limiting SMSFs from investing in cryptocurrency.
“It’s a relatively new asset class and many financial advisers lack experience with this type of investing,” he said.
“But this is changing. Cryptocurrency is proving to be an attractive option for many SMSFs that have done their research and are comfortable with the risk.
“We are also finding a growing number of advisers are coming to Cointree’s account managers wanting to learn more about this asset and how it can be part of an SMSF portfolio. Consequently, we’ve seen 53 per cent more SMSF applications in the last three months than we did in the whole of last year, a trend we expect to continue as SMSFs look to diversify their portfolios.”
SMSFs are a significant pool of investment capital for the crypto market, according to Cointree. Total assets are about $750 billion, and they comprise about 26 per cent of the total superannuation pool of funds.
Tony Zhang is a Journalist at SMSF Adviser, which is the leading source of news, strategy and educational content for professionals working in the SMSF sector.
Since joining the team in 2020, Tony has covered various publications across the legal, financial and professional services sectors including Lawyers Weekly, Adviser Innovation, ifa and Accountants Daily.