Self-managed superannuation funds (SMSFs) are increasingly popular to invest in cryptocurrency. An SMSF is a fund that you manage yourself, and it gives you more control over your investments.
If you want to know how crypto SMSF works, this article is going to guide you. Here you can find different benefits of using an SMSF and things to know before buying crypto.
What is SMSF?
An SMSF is a trust where the trustee receives contributions from members, which are then used to purchase assets that are held in the SMSFs name. The term ‘Superannuation’ is commonly used when referring to pension plans available in Australia.
A member may also be a trustee if they choose to do so. However, you can’t have more than four trustees or directors in an SMSF. Also, you may choose to appoint a corporate trustee if it is more than one member.
How Does SMSF Work?
To know more about how crypto SMSF works, you should know its four essential roles to perform. They are:
- Receiving contributions from members and investment earnings
- Investing in assets such as crypto, property, stocks or cash
- Paying benefits to the member and their dependents if required upon retirement or other circumstances
- To make sure that your actual money is returned at the end of the term
The trustee is responsible for ensuring these conditions are met, and they do so by following an investment strategy agreed upon with members before starting to invest. The Australian Taxation Office (ATO) regulates SMSFs as per the Superannuation Industry (Supervision) Act 1993, and it is essential to abide by their guidelines when setting up and managing an SMSF.
What are the Benefits of Using an SMSF for Crypto?
There are a few essential benefits that come with using your SMSF to invest in cryptocurrency:
1) Control Over the Investment
By managing your SMSF, you can decide how much your fund should be invested in cryptocurrency and which coins to invest. You can also determine the amount of risk you are willing to take with your investment, and the fund’s portfolio is maintained according to your risk profile.
In contrast to other investment options, your money manager decides these things for you or where you do not have control over your investments.
You will be able to track the performance of your investment and take advantage of market trends with an SMSF.
2) Tax Benefits
Using an SMSF for crypto investment gives you certain tax benefits. You can claim a full deduction on the fund’s income tax from contributions you make. Also, most investments held for more than 12 months will be taxed at a reduced rate of 15 percent. Additionally, you may not need to pay capital gains tax under certain circumstances.
3) Estate Planning
Estate planning means using your assets to provide for your beneficiaries when you pass away. SMSFs are not callable by creditors and allow you to leave control of your assets in the hands of your beneficiaries. You can also nominate the beneficiary and provide instructions on using the assets.
It can be a more advantageous way to distribute your wealth than through a will, as it allows for more flexibility and control over the property.
These are some crucial tips to know before investing in crypto using SMSFs.