How to hold crypto in your SMSF and pay less tax
24 Jul
24 Jul
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.
If you're holding crypto outside your SMSF, you're probably paying too much tax. The tax difference between personal holdings and SMSF holdings is enormous.
As an individual investor, you pay capital gains tax at your marginal rate, which can be as high as 45% + 2% Medicare. In an SMSF, you pay 15 per cent flat rate*. That's a massive difference already.
But it gets better. If you hold crypto in your SMSF for more than 12 months, you get a one-third discount on capital gains. That reduces the effective rate to 10 per cent*. Still way lower than personal tax rates.
When your SMSF moves into pension phase, capital gains become tax free^. You sell your Bitcoin or Ethereum and you owe the ATO nothing.
That's where the real tax advantage sits. If you're planning to hold crypto long term until retirement, pension phase makes it incredibly tax efficient.
Hold your crypto for more than 12 months. Timing matters. If you're close to moving into pension phase, wait and sell after the transition so that you can potentially avoid the tax bill entirely.
If you have losses on other investments in your SMSF, use them to offset your crypto gains. Capital losses can reduce your taxable capital gain.
You need proper records proving your crypto is held by the SMSF, not yours personally. You need valuations on 30 June each year. You need transaction records for everything.
That documentation is what makes the tax efficiency real. Without it, the ATO won't accept the concessional rates.
Hold crypto personally and you might pay 37 to 45 per cent capital gains tax depending on your income. Hold it in your SMSF and you pay 15 per cent. Hold it in pension phase SMSF and you pay zero.
Over 20 years, that difference adds up to tens of thousands or even hundreds of thousands of dollars you keep instead of giving to the ATO.
If you're holding crypto long term, your SMSF isn't just a compliance structure, it's a tax planning tool.
*When individual members have less than $3mil super balances each as at current date
^The threshold for starting this tax effective pension is $2.1mil per individual
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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