For the last few years – there has been a buzzword in the SMSF landscape – “Crypto/ Bitcoin”. Recently the ATO issued guidance on navigating the crypto puzzle for SMSFs and disclosing the shocking increase in total SMSF holdings in cryptocurrencies to over $1.675 billion in 2025.
Over the last few years we have seen the risks and volatility in SMSF Crypto, especially in 2021 where certain coins lost up to 99% of their value overnight.
Given the growth – the ATO has detailed guidance for SMSF Trustees when investing including:
- Name your wallet correctly: Ensure your SMSF’s crypto wallet is registered in the name of your SMSF.
- Separate investments: This is a key error we see on a daily basis, SMSFs must separate their personal crypto investments separate from your SMSFs assets. Failing to do this can be a breach of the Superannuation Industry (Supervision) Act 1993.
- Use legitimate platforms: It’s extremely important for SMSF members to be aware of legitimate platforms and always purchase and trade on reputable, well-established platforms. In Australia, leading platforms include Coinspot, BTC and Independent Reserve. There have been a number of horror stories from SMSF Trustees investing in US based Crypto exchanges that have gone bust and filed for Chapter 11 leaving SMSF members with a realised loss and no return of funds/ holdings.
- Maintain good records: Record all transactions, including purchases, sales, and transfers of crypto assets. Sales and transfers are classified as ‘disposals’ and may result in capital gains tax (CGT). Keeping good records is essential for calculating CGT. Also, keep information about your wallet and any changes made to it. Reputable exchanges will provide these reports which can be downloaded and provided to your SMSF administrator/ auditor. This includes valuation records.
- Protect your wallet password: Never share your wallet password with anyone. Store it securely to prevent unauthorised access to your crypto assets.
- Avoid related party transactions: When transacting in crypto assets with related parties, all transactions must be done at arms-length.
SMSF Crypto Theft
SMSF cryptocurrencies are not regulated and are not protected and are subject to the heightened risk of SMSF scams, in our experience SMSF Crypto/ Bitcoin investments have been lost to
- Theft
- Misplaced passwords
- Fraudulent schemes
There is a heightened risk of SMSF Crypto theft, so it’s important to do your due diligence to ensure the platform you use is legitimate and regularly audited and review of the protection of storage of wallets and passwords. Importantly – two-factor authentication is imperative.
Trustee Duties for SMSF Crypto/ SMSF Bitcoin
Trust Deed
The trustee must ensure that the SMSF Trust Deed has the necessary powers to invest in SMSF Crypto. Any SMSF Trust Deeds dated prior to 2020 will most likely require a SMSF Deed of Variation to ensure the necessary powers are included.
Investment Strategy
The SMSF Investment Strategy is required to regularly reviewed in accordance with your SMSF Investments. Once is investment is made in SMSF Crypto – the trustee must document their understanding of the asset class and detail the percentage range. This should include the nature of the SMSF Cryptocurrency held and the investment platform used to invest as well as the SMSF Storage method.
SMSF Cryptocurrency Wallets
There are two types of SMSF storage wallets:
- Hot Wallet – online storage of cryptocurrency
- Cold Wallet – off-line wallet storage
Hot wallets generally refer to exchanges detailed above such as Coinspot and BTC. The challenge is to satisfy the SMSF auditor when you have a cold wallet – where you will have to provide Wallet ID & Blockchain website details to support the existence of the SMSF Crypto asset and the accuracy and completeness of the transactions for the year. For offline wallets, SMSF auditors may be reluctant to sign off on the annual return and may request further evidence. For SMSF Crypto wallets, where any of these circumstances arise an auditor may be unable to satisfy their audit evidence requirements and may issue a “qualified” auditor report and a SMSF Contravention Report may be issued to the ATO.
It is important that SMSF Trustees understand their obligations prior to investing in SMSF Cryptocurrency to ensure costly and disastrous mistakes are made by either not updating your SMSF Trust Deed and Investment Strategy as well as the choice of online platform provider. IF you are unsure – be sure to reach out to Redwood for expert SMSF Administration and SMSF Audit.
