What it actually costs to set up and run an SMSF with crypto

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.

Before you move crypto into your SMSF, know what you're paying for. Whils the setup cost isn’t tax deductible, the annual running costs are real and they're tax deductible to the fund. Here's what to budget.

The one off setup costs

Setting up an SMSF structure costs around $3,500. This includes company registration, trust deed preparation, ASIC registration, and usually a meeting with your accountant to walk through the documents. It takes about five to ten business days.

This is paid once. It's not cheap but it happens only at the start.

Another thing is that it can be paid by super monies so you’re not directly out-of-pocket.

The annual accounting and tax costs

This is where most people underestimate. Budget $2,500 to $3,500 per year for accounting and tax compliance minimum. This covers preparing your SMSF financial statements, tax return, and a meeting to review everything with your accountant (hopefully they want to meet with you on an annual basis like us).

If your crypto holdings are simple (bought on one exchange, held long term), you'll be on the lower end. If you're trading frequently across multiple platforms, costs go up. Activity and complexity increases the work involved, and hence the costs.

The annual audit fee

Your SMSF needs an independent audit each year. Budget around $400 to $600 for this. Some years it's cheaper depending on complexity.

Government fees

There are several small recurring fees paid to government bodies. The ASIC review fee for SMSF companies is about $70. The SIS levy from the ATO is around $260. Some accountants charge an extra compliance fee of $300 to $400 if you want them managing ASIC compliance directly for your SMSF company.

Platform and exchange fees

Beyond accounting fees, you'll pay exchange fees when you buy or sell crypto. These vary. Some platforms charge 0.5 per cent per transaction. Others charge more. If you trade frequently, these add up fast.

Self-custody avoids exchange fees but you lose the convenience and compliance support.

The real question: does it make sense?

Whilst there is no law that says you need a minimum balance to start an SMSF you do need to be perform the cost/benefit analysis. 

Add all of this up, initial setup around $3,500, annual running costs around $4,500 depending on the SMSF investment activities.

If your SMSF balance is on the smaller side, say $100,000, those costs eat into returns significantly. The maths only works if you have enough balance to make the fees worthwhile.

What changes the math

If you hold crypto long term and don't trade much, costs stay low. Your accountant's fees stay predictable. Exchange fees stay minimal.

If you're actively trading crypto or getting into more exotic/private investments, costs spike. You're paying higher accounting fees because your records are more complex.

Can you call and have a quick phone call with the accountant about something on your mind, or are they an email-only accountant responding 2 weeks later? The service and communication standards matter and should be factored into this. “You pay for what you get” goes the saying.

The tax deduction

Here's the good news, most if not all annual running costs are tax deductible to the SMSF. You're not paying them from your personal money, the SMSF does. So the real cost is lower than the headline number.

Plan ahead

Before you set up an SMSF for crypto, do the maths. Calculate your balance, estimate your trading activity, get quotes from accountants, and check exchange fee structures.

Make sure the costs make sense for your situation. Sometimes they do, sometimes a simpler structure is better until your balance grows.

Ready to understand whether SMSF crypto makes sense for you? Are you ready to have a pro-active accountant you can talk over the phone with and have personal meetings with? We can help with your SMSF setup and annual compliance needs.

Contact Consensus Layer

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!