An increasing number of Australians are turning to cryptocurrency to secure their retirement, with self-managed super funds (SMSFs) witnessing a 400% growth in cryptocurrency allocation over four years, surpassing the growth rates of stocks and bonds.
Statistics from the Australian Tax Office (ATO) for the quarter ending in September reveal that nearly 612,000 SMSFs now hold a total of $658.6 million (992 million Australian dollars) in cryptocurrencies. This marks a substantial increase from just under $131.5 million (198 million AU) in the same quarter of 2019.
Crypto has become the fastest-growing asset class in SMSFs, outpacing listed shares, the largest allocation category, which grew by 28% during the same period. Despite a slight 0.8% drop from the June 2023 quarter and a 2.4% drop from the previous year, cryptocurrency remains a significant and expanding component of Australian self-managed retirement portfolios.
Despite the rise in recent years, the amount of crypto held in self-managed funds is still down 38% compared to the all-time high of nearly $1.06 billion (1.6 billion AU) in the quarter ending June 2021 during the last crypto bull cycle.
Talwar also emphasised that cryptocurrency constituted only 0.1% of the total net assets within Australian SMSFs at the close of the last quarter. He pointed out that smaller-sized SMSFs tended to have a more significant allocation to cryptocurrencies in their portfolios.
According to Talwar, the inclusion of crypto within a super fund is becoming increasingly common, with local crypto exchanges offering crypto superannuation products witnessing a rise. However, he cautioned that while people are eager to hold crypto in their super funds, there are stricter rules governing this practice.
He highlighted that SMSF strategies must explicitly permit holding crypto solely for providing retirement benefits. Compliance measures include thorough auditing, separating SMSF holdings from personal holdings, and ensuring a clear distinction between the two.
“Your SMSF strategy must allow you to hold crypto. It must be for the sole purpose of providing you with a retirement benefit. You need to get everything audited. You need to segregate SMSF holdings from personal holdings. You can’t have a blurred line between the two.”
Unfortunately, the specific cryptocurrencies held by SMSFs and the corresponding gains or losses remain undisclosed, as the ATO does not furnish information regarding portfolio holdings or performance.