Crypto in your SMSF: the rules for trustees

More SMSFs are holding cryptocurrency, and it is a permitted investment if your fund’s rules and strategy allow it. But crypto comes with some specific traps that catch trustees out, mostly around proving the fund owns it and keeping it separate from your personal holdings. This article explains what you need to do.

Check it is allowed first

Before the fund buys any crypto, two things need to be true. Your fund’s trust deed, which is its rulebook, must permit the investment, and your investment strategy must support it. Because crypto is volatile, your strategy should show you have thought about the risk, especially if crypto is a large part of the fund.

The big one: keep it in the fund’s name and separate from yours

This is where most trustees get into trouble. The crypto must be held by the fund, in a wallet or exchange account in the fund’s name, completely separate from any crypto you hold personally. An account in your own personal name does not count as the fund owning it, even if you think of the holding as the fund’s.

So you cannot:

Hold the fund’s crypto in your personal exchange account.

Mix the fund’s crypto with your own in the same wallet.

Move crypto you already own personally into the fund.

That last point surprises people. You generally cannot transfer your own personal crypto into the fund, because the rules prevent a fund from acquiring most assets from a member, and crypto is not one of the exceptions. The fund needs to buy its own crypto, in its own account, with the fund’s money.

You have to prove it exists and what it is worth

At the end of each financial year, you need to be able to show the auditor that the crypto exists, that the fund owns it, and what it was worth at that date. A screenshot of a holding is not enough on its own to prove the value. The auditor will want objective evidence, such as the closing price for that date published by an exchange. You should also keep a complete history of your transactions so everything can be reconciled.

What happens if you cannot prove it

If you cannot show that the fund owns the crypto, that it is separate from your personal holdings, and what it is worth, the auditor may have to flag a problem in the audit report and, in some cases, report it to the regulator. This is avoidable with good setup and good records from the start.

Practical steps to get it right

Set up the wallet or exchange account in the name of the fund, using the correct title for the trustee acting for the fund. Use the fund’s bank account to buy the crypto, never personal money. Keep the fund’s crypto entirely separate from any personal holdings. Keep full records of every transaction. And get the year-end value from a reliable, objective source.

The bottom line

Crypto is allowed in your SMSF, but the fund must own it in its own name, kept separate from your personal crypto, bought with the fund’s money rather than transferred in from you, and you must be able to prove it exists and what it is worth at year end. Set it up correctly from day one and keep good records, and crypto can sit in your fund without drama.

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This article is general information for trustees and members. It is not financial, legal or tax advice about your particular situation. Consider getting advice from a licensed professional before making decisions about your fund.