Bitcoin and SMSFs: Unlocking New Potential

Why Consider Bitcoin for Your SMSF?

1. Potential for High Returns: Bitcoin has shown tremendous growth over the past decade, outperforming most, if not all, traditional assets.
2. Portfolio Diversification: Adding bitcoin to your SMSF can help spread risk across different asset classes.
3. Hedge Against Inflation: Bitcoin's limited supply makes it an attractive option for protecting your wealth against inflation.
4. Direct Ownership: Unlike some traditional investments, bitcoin in your SMSF gives you direct ownership of the asset.
5. 24/7 Market: The Bitcoin market never sleeps, allowing for greater flexibility in trading, if and when needed.
   
   

SMSF Performance: Traditional vs. Bitcoin Investment

To illustrate the potential impact of including bitcoin in your SMSF, let's compare the average returns of traditional SMSFs in Australia with the hypothetical returns had they invested $60,000 in bitcoin over the last four years:

*annual calendar year performance of the median Growth fund.

Disclaimer: The above table is for illustrative purposes only and should not be considered investment advice. Bitcoin prices are highly volatile, and past performance does not guarantee future results.

Steps to Establish an SMSF in Australia

Setting up a Self-Managed Super Fund (SMSF) can be done through an accountant or a specialised SMSF Setup Administrator.

Accountants typically offer personalised guidance, while online SMSF administrators often provide more cost-effective solutions.

The following outlines the general process of transitioning from your current superannuation fund to an SMSF through an online SMSF administrator, such as eSuperfund.

1. Choose the Admin: Selecting the right SMSF administrator is crucial. A good choice allows you to buy bitcoin from any digital asset exchange, potentially lowering fees for your SMSF purchases. In contrast, a poor choice may restrict you to specific exchanges due to administrator kickbacks, giving you limited options for your SMSF investments.
2. Online Application: Complete the administrator's online application form. During the application process, you'll need to choose between a Family Trust and a Corporate Trust structure. It's crucial to thoroughly research your options before applying, as each structure has its own set of advantages and disadvantages. Key factors to consider include flexibility, setup and ongoing costs, tax implications, and other relevant aspects specific to your financial situation and goals.
3. Document Preparation and Signing: The administrator prepares all necessary documents based on your application. These typically include the Trust Deed, Trustee Declarations, ATO applications for TFN and ABN, and additional required paperwork. They'll send these to you for review. You then sign the required pages before uploading them back to the administrator.
4. SMSF Registration: Administrator registers the SMSF with the ATO.
5. Bank Account Setup: The administrator may offer to set up your SMSF bank account with their preferred financial institution. However, you should have the option to choose your own bank. Check with your administrator to understand if they allow flexibility in bank selection or if they have restrictions. Consider factors such as fees, integration with the administrator's systems, and convenience when making your decision.
6. Confirmation Package: Receive "Final Establishment Package" with all SMSF setup details.
7. Exchange Account Setup: Set up an account with a bitcoin exchange that supports SMSF investments, such as Bitaroo. Through a dedicated bitcoin exchange like Bitaroo, it’s easier than ever to buy bitcoin, whether that’s express purchases, bitcoin trades or over-the-counter (OTC) bitcoin transactions. We ensure you remain SMSF compliant with annual statements accessible to every user for their accounting needs.
8. Rollover Existing Super: Transfer super from existing fund to new SMSF. Tip: To streamline the transfer of your super from your existing managed fund to your new Self-Managed Super Fund (SMSF), consider moving your superannuation to cash within the managed fund before initiating the rollover request. This step can help expedite the process, as the rollover typically involves the longest delays.
9. Bitcoin Security Setup: Consider utilising services like Skippy Premium for comprehensive security and assistance with entering the bitcoin market (optional).
10. Secure Bitcoin Storage: Purchase and set up a good hardware wallet for secure bitcoin storage (recommended).
    
    

Fees and Costs to consider when using an SMSF Administrator:

• Setup fees: Often free or minimal with some providers
• Annual administration fees: $1,000 - $3,000
• ATO Supervisory Levy: Usually included in administration fees
• Audit fees: Usually included in administration fees
• Investment fees: Vary depending on the exchange and investment strategy
• Insurance fees: Vary depending on your personal circumstances
• Hardware wallet costs: $100 - $200 (Recommended)
• Ongoing education and security services: Variable

While using an SMSF Setup Administrator can simplify the process and potentially save time, it's crucial to understand your responsibilities as an SMSF trustee regardless of the setup method chosen.

Known SMSF Setup Administrators in Australia

Several providers can help you set up and manage your SMSF, but here are two known providers:

1. ESUPERFUND: Known for its low-cost SMSF setup and administration.
2. SMSF Warehouse: Affordable SMSF setup services.

Disclaimer

Bitcoin investments carry high risk due to their volatile nature. Past performance is not indicative of future results. Always conduct your own research before making any investment decisions.

For more specific questions about SMSFs and bitcoin investments, please speak to one of our Skippy Premium experts.