Considering adding crypto to your superannuation savings?
You're not alone.
While few investors would have considered relying on crypto to help their retirement nest eggs a few years ago, sentiment is beginning to change.
Considering adding crypto to your super?
If you have been thinking about adding crypto to your super portfolio, there are a few important things you need to know.
First, Australian super funds don't currently invest in digital tokens.
While that may change, at the moment only people with self-managed super funds (SMSFs) can add the likes of Bitcoin (CRYPTO: BTC) and Ethereum (CRYPTO: ETH) into their fund.
Second, if you are considering taking this path, don't lose sight of the high volatility that's still part and parcel of almost all cryptos, save some stablecoins.
Over the past 12 months, for example, the Bitcoin price has been as low as US$28,894 and as high as US$68,790, according to data from CoinMarketCap.
As for the world's number 2 crypto by market cap, over the past full year the Ethereum price traded as low as US$1,451 and as high as US$4,892.
Something to keep foremost in mind if you're looking at accessing your super savings in the short term.
What the industry experts are saying
Karl Mohan is the general manager Asia Pacific at Crypto.com.
Mohan offered the following tips to folks contemplating adding crypto to their SMSF (courtesy of The Australian):
One, always get financial advice specific to the circumstances of the super fund and the individual. Two, understand risk appetite and investment horizons. Three, learn about crypto and understand what you are investing in.
Creation Wealth senior financial planner Andrew Zbik stresses the speculative nature of tokens like Bitcoin and Ethereum. "It's an asset, but it's a speculative asset. If you are new, you need to ask yourself, 'Why am I doing it?'" he said.
According to SMSF Association deputy CEO Peter Burgess, only $218 million worth of crypto was held in self-managed super funds in 2020. That's less than 0.1% of the total SMSF assets.
Though crypto numbers in SMSFs have likely notched up in the past year, Aussie investors eyeing their retirement savings are "adopting a very conservative and measured approach," he said.
Burgess also highlighted the importance of knowing the tax codes that may apply (quoted by The Australian):
Holding crypto must be allowed under the terms of the fund's trust deed and it must be consistent with the fund's investment strategy, which, among other things, requires an SMSF trustee to consider the risk profile of members, investment diversification and the cashflow and liquidity needs of members.
And if you want another hurdle to adding crypto into your super fund, he added, "Many licensed financial advisers are not permitted to provide advice on such investments, which adds another layer of risk."
Finally, there are the tax implications.
H&R Block director of tax communications Mark Chapman cautioned, "It can be difficult to calculate income and gains from cryptocurrency in your fund's tax return. A reputable tax agent will be able to do this for you."
