Disclaimer: The content provided in this blog post is for informational purposes only and does not consider your personal financial circumstances. Please conduct your own research and consult with a qualified financial advisor before making any investment decisions. The volatile nature of the cryptocurrency market carries inherent risks, and individual circumstances may vary.
f you're holding crypto in your SMSF, there's something important you probably haven't thought about. What happens to it when you pass away? It's not a comfortable topic, but it matters. A lot.
If nobody knows where your crypto is stored or how to access it, your family might not be able to get to it. Your holdings could sit frozen on an exchange or in a hardware wallet that nobody has the password to. That's a worst case scenario, but it happens.
Your regular Will handles your personal assets. It doesn't automatically pass control of your SMSF to your beneficiaries. Your SMSF has its own rules about who can take over as trustee and what happens to the assets.
That's why the trust deed of your SMSF matters. It spells out what happens to the fund and its assets when a trustee dies.
Successful estate planning starts with documentation. Write down which exchange your crypto is on. Document the account details. If you use hardware wallets, store that information somewhere secure that someone you trust can access.
If your crypto is in self custody, your beneficiaries need to know how to access it. That means keeping a record of passwords or seed phrases in a secure place, like a safe deposit box or with a solicitor.
Your beneficiaries don't need to know your passwords. But they do need to know that you hold crypto, roughly how much it's worth, and where to find the documentation about it.
A simple letter kept with your will goes a long way. It doesn't need to be complicated. Just clear directions.
While you're thinking about your SMSF structure, it's worth having a conversation about tax efficiency during your lifetime too.
Two strategies that come up a lot for crypto SMSF members are the withdraw and recontribute strategy and tax parcel selection.
If you're over preservation age and still working, withdrawing funds tax free from super and recontributing them as non-concessional contributions can reduce or eliminate the taxable component of your balance. That matters a lot at death. Taxable components passed to non-dependants (like adult children) attract a 15% tax plus Medicare levy on the taxed element. Reducing that component now can save your beneficiaries a meaningful amount.
Tax parcel selection is simpler but equally powerful. When your SMSF sells crypto, you're not stuck using the first-in-first-out method. Selecting which parcels to dispose of first, whether that's the ones with the highest cost base, the ones you've held longest, or the ones sitting at a loss, can significantly reduce the capital gain in any given year. In accumulation phase that's taxed at 15% (or 10% with the CGT discount for assets held over 12 months). The difference between smart parcel selection and default treatment adds up quickly when you're dealing with assets that have appreciated substantially.
A quick note on scope: what we do sits strictly in the tax minimisation space. We're not financial advisers and we don't tell you what to buy, sell, or hold. Whether these strategies are right for your situation is a conversation to have with your licensed financial adviser. What we focus on is making sure that once the decision is made, the tax outcome is as efficient as possible.
We help clients with both of these as part of our annual SMSF work. They're not set and forget. They require active decisions each year
If you’re intrigued by the notion of investing in cryptocurrencies via SMSF but find yourself overwhelmed by the initial steps, Consensus Layer is here to assist you. As a team of seasoned crypto tax and accounting specialists, we are well-versed in navigating the complex landscape of crypto investments. Let us be your trusted guide in ensuring compliance with superannuation and tax laws. We pride ourselves on delivering exceptional client service while championing the growth of the crypto industry.
Investing in cryptocurrencies through SMSF offers an exciting opportunity for crypto enthusiasts who firmly believe in the long-term potential of digital assets. However, it’s crucial to grasp the risks involved and the compliance requirements before embarking on this journey. Seek professional advice, choose an Australian crypto exchange that caters to SMSFs, and if you need expert assistance, reach out to our SMSF Specialist Advisor, David Fam at Consensus Layer, on 07 3569 3701 or email him at david@consensuslayer.com.au. Together, we’ll navigate the intricate world of crypto taxes and accounting to help you unlock the full potential of your superannuation!
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