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Risks You Need To Consider Before Your SMSF Invests In Crypto

Cryptocurrency’s popularity as an investment has led to rising concern and an increased need for awareness around the risks of investing your SMSF’s funds into the digital asset. It might be tempting, but having as much information and understanding as you can around cryptocurrency might save you a lot of grief before you commit.

Superannuation funds have yet to fully embrace cryptocurrency as an investment option for the funds of their members, but the flexibility of SMSFs and how trustees manage their investments mean that cryptocurrency remains a possibility for them.

Your first step should be to check that your trust deed allows this kind of investment. Even though most modern deeds give the trustee freedom to invest in what they like, they are all different. Currently, there is no explicit legislative prohibition or restriction on SMSFs investing in crypto so long as you follow the investment rules for trustees.


Some advantages to adding this asset to your SMSF could include:

  • Further diversification of your SMSF by adding a new type of asset to your portfolio
  • Security of the investment as transactions using cryptocurrency are trackable through blockchain technology
  •  Potential for high windfalls for those wanting a high risk, high return investment strategy
  • Reduced tax on the returns for SMSFs in comparison to investing as an individual (cryptocurrency has specific tax implications that the ATO monitors closely).


Some of the risks associated with cryptocurrencies in your SMSFs could extend to:

  • Unpredictability of the asset due to its relatively short history (within the last five years, there has been no clear patterns or trends to map out it’s trajectory).
  • Instability of the investment due to the potential for future government regulation
  • High volatility of the investment due to dramatic rises and falls in recent times
  • High risk due to no physical asset backing up the investment; if it fails you lose everything

Cryptocurrency Scams Targeting SMSFs

Superannuation is an attractive target for scammers, and the rise of emerging cryptocurrencies make them attractive and easy to impersonate for that purpose. Be wary of investment opportunities in cryptocurrency that might seem too good to be true.  Offenders are difficult to catch and money lost on bitcoin scams can be difficult to recover, especially when offenders operate outside of Australia and all contact has been online

Common examples of scams involving cryptocurrency that SMSFs should be aware of include:

  • Being called or emailed by scammers with an investment opportunity or approached by their friend, family member, or online romantic partner who tells them how they have made money online and suggests that they try it too.
  • Signing up to ‘crypto-asset trading’ online and being told to deposit funds into a trading account, either via a crypto wallet or bank account.
  • Scammers encourage consumers to deposit more funds into the account.
  • When an investor logs into their account, it may look as though they are making profits initially (due to fake data), but eventually shows ‘trading losses’ even though no actual trading is taking place.
  • When the consumer asks to withdraw their funds, bitcoin scammers either cease all contact or demand further payment before funds can be released.
  • Often scammers are also seeking to mine personal information from victims to engage in identity fraud.

If you’re someone who often finds it difficult to make large lump sum payments for goods or services, you may want to consider looking into “Buy Now Pay Later” services.

Buy now pay later essentially means that, rather than paying in a full lump sum payment for a product or services rendered, there may be an option to pay through instalments of a certain amount over a set period to make the sum of the full amount in total. This method should allow you to pay in full for the product or service without overly straining your finances – you pay back what you can, as agreed upon when you begin the buy now pay later service.

Some popular buy now pay later services include Afterpay, Zip Pay, Brightepay, and some credit card networks such as  Mastercard and Visa, can offer buy now pay later arrangements.

Though it can be a convenient, immediate solution, it may be challenging to juggle the necessary repayments with other financial commitments. It’s not always the most appropriate method for people, and you should bear in mind your situation and ability in paying back the amounts. 

Before you sign up, keep in mind: 

  • It becomes easier to overspend with buy now pay later services, so know your limits on what you can and can’t afford.
  • You will be charged fees and costs to use the service, which can add up to a princely sum in and of itself.
  • Keeping track of your payments can be tricky if you’ve signed up for multiple services.
  • It could affect your loan applications for a car or mortgage as lenders consider buy now pay later spending just as much as your credit score.
  • Late repayments can appear on your credit report, which affects your ability to borrow money in the future.
  • Layby can be a cheaper alternative to buy now pay later, with no account-keeping or late fees to consider

If you are someone who could make use of BNPL services, you may wish to:

  • Ensure that when using the BNPL service, you stick to a set limit on what you spend so that you can comfortably pay it back later. 
  • Aim only to have one BNPL account at a time to manage payments through, rather than confuse yourself with multiple payments across different providers.
  • Always budget for bills, loan payments and BNPL payments, and 
  • Rather than use your credit card for payments to your BNPL account, consider linking to your debit account instead.

If you would like assistance in planning your financial future, help in managing your budget or some friendly advice, see us for a chat about what we can do for you.


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