Investing Made Simple: How and Why You May Consider a Crypto SMSF
2022.06.03 14:06
Investing Made Simple: How and Why You May Consider a Crypto SMSF
Everyone should be investing for their retirement, and thinking about ways they can save cash now so that they can live comfortably when they decide to leave work for good.
A self managed super fund (SMSF) is an example of this, and is especially widespread as an option in Australia. It allows a group of people to pool their capital and invest in assets which will ideally grow in value over time.
Unsurprisingly, this traditionally involves focusing on things like shares and property. But today, cryptocurrencies are seen as increasingly attractive as an alternative.
Let’s look at why setting up a self managed super fund with Swyftx could be a good idea, and what benefits crypto brings to the table in this context.
The tax outlook is positive
Buying cryptocurrency doesn’t net you a reliable return year on year, compared with cash kept in a savings account that has interest added annually.
However, what it does offer is the potential to significantly increase in value over time, which is why governments around the world treat it like any other tradable asset for tax purposes.
In Australia, for example, crypto gains are taxed at 10%, in line with standard capital gains tax rules. This is relevant when it comes to adding crypto to your SMSF, because if you sell it once the members have reached retirement age and are drawing a pension from it, the capital gains tax will not apply.
So long as you are confident that the crypto you pick stands a good chance of going up over the coming decades, you won’t have to worry about being taxed when the fund starts paying out when you retire.
Buying crypto is easier than ever
As mentioned, there are already SMSFs which have been set up by reputable crypto exchanges that ensure that you can make regular investments as part of your fund’s wider portfolio of assets without needing to jump through a whole lot of hoops to achieve this.
This simplicity does come at a cost, as there will usually be extra fees to pay for procuring the currency via an exchange, as well as for the various accounting and legal expenses which are part and parcel of this process.
However, confidence in the long term potential of the crypto market should help you to justify any upfront and ongoing expenses like these with ease.
Security is significant
Cryptocurrency is based on the principles of cryptography as well as on decentralization, so the money you invest as part of your SMSF will be safe and sound, indelibly linked to your fund through the ledger that is the blockchain.
In most cases you don’t even need to keep your crypto on the exchange that you used to purchase it, but can instead move the currency to a private wallet for an added layer of security and control.
Returns are attractive
There is no getting away from the headline-grabbing volatility of the crypto market. But when you’re thinking about saving for retirement, it’s important not to get bogged down in the short term peaks and troughs of any market.
Here, you’ll be playing the long game, and you’ll have to think in terms of where the market will be in one, two, three or even four decades.
Looking at how much value Bitcoin has gained since it was launched could be an indication of even bigger things to come.
Any retirement investment has to be made with a recognition of the risks involved, and with expert advice to hand, so make sure you check the ins and outs of crypto as an SMSF asset before you pull the trigger.
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