Superannuation & Crypto: Navigating Australia’s New Tax Changes

00:00
I have Natalia Clark joining me on this episode from Easy Super and we’re going to go through a lot of really key things around running your own self-managed super fund and why you could possibly benefit from this by putting crypto into it. So we’ve got a lot to cover here, and we’ll also talk about this capital gains tax, this unrealised capital gains tax, which is absolutely insane. But Natalia, welcome to the podcast.

00:29
Hi, Peter. Thank you very much for inviting me. It’s my pleasure to be here with you. All right. We’ve got a lot to cover here, but first, can we start off with a bit of an introduction about yourself and so we get an understanding of who we’re actually talking to here. I’m an SMSF accountant, SMSF specialist, SMSF auditor and SMSF advisor. SMSF stands for Self-Managed Superannuation Fund. I’ve been doing SMSFs for last 22 years.

00:59
And I’ve been running my own company, which specialises in SMSFs, for the last 12 years. Wow. Okay. So we could definitely got a lot of experience here. And I think for our international listeners, a super fund here in Australia is very common. We’ve had them since the nineties, but for the U S listeners or international listeners, it’s essentially your 401k. So it’s that pension fund that you’re putting away yourself so that your

01:26
ready for retirement and self-managed super funds have this interesting edge to them because you control exactly what goes into them. So can we talk about what they actually are and how crypto holders can be benefiting from this and why they should be interested? That’s right. with SMSFs in Australia, we have the compulsory superannuation in Australia. And it’s been introduced in 1990s, like you mentioned.

01:55
So everyone who works in Australia and works for the company, their employer is required to pay certain percentage of wages towards their superannuation. And this superannuation is getting managed by big funds, say, like large superannuation funds, which are usually retail or the industry-related superannuation funds.

02:24
your money, your superannuation will go into your account. You cannot access this account until you retire. So there are fund managers who manage your superannuation for you. They decide where to invest money. They decide what to do with your money to grow your balance, to grow your wealth. With self-managed superannuation fund, it is when you

02:50
move your money from this large supernation providers, large funds into the small fund which you manage yourself. So you will become a manager of your own supernation. What it will give you, it will provide the opportunity to make the investment decisions, to invest in different asset classes. And this is what I guess very interesting about how Australians can

03:19
They cannot access their superannuation until their retirement, but they can manage and control their superannuation. And in that way, can make more money, potentially they can make more money than their money being managed by the fund managers in the large superannuation funds. And with cryptocurrency, small self-managed superannuation funds are allowed to invest in cryptocurrency, which is wonderful because this is how people can make

03:49
um, X returns instead of just making conservatively five or 7 % per year. Because when you think about it, if you’re a fund manager and you’re responsible, uh, for managing billions of dollars, actually, by the way, in Australia, super nation funds have trillions of dollars under their management. Yeah. So if you’re a fund manager and managing billions of billions of dollars,

04:18
Would you take an extra risk? So you probably wouldn’t. So you would invest conservatively. It means you will deliver a conservative return as well, which is usually wouldn’t go above 5-7, maximum 10 % per year. And your returns will move with the market. If market is going up, the returns will be up. If market is going down, the returns will be down.

04:49
Okay. So essentially the self-managed superfund gives you that level of control so you can decide where to invest those particular funds. And it’s really cool to see that we can use it to purchase crypto and put crypto assets into it. Is it a common thing? Like, do we see a lot of people with self-managed super funds having crypto in there? We started seeing people invest in their superannuation into crypto in 2017. I was one of the

05:18
pioneers in Australia in terms of accounting companies, SMSS specialist companies started dealing with crypto clients. From 2017 to 2022, in the first five years of us doing crypto and SMSS, we didn’t have lot of interest. People were not that interested in investing in crypto, as you remember. First of all, it was bear market.

05:48
Then it was COVID, then Bitcoin and other cryptocurrency. It wasn’t that widespread. So back then it was not a lot of interest. However, in the past two or three years, people started investing in cryptocurrency a lot, especially in the SMSF, especially in Bitcoin and top 10 coins.

06:15
And in the last 12 months, even the very conservative investors, they are turning into crypto and they diversifying their portfolio. Say, for example, they already invested their superannuation in buying property or in shares. Now they are looking to invest in crypto, potentially making more

06:41
rewards, higher rewards, higher results, and also diversifying in case if shares are going down, people think, know, crypto will go up. Yeah, we’ve got all these trade wars, tariffs coming in play, and we’ve seen that the US markets crash dramatically because of it. And a lot of people decide to go over to other stocks such as gold and cryptocurrency to try and ride out that volatility in the market, which is absolutely crazy.

07:12
So how are people actually storing their crypto in the particular self-managed super funds? Are they managing themselves? Are they using cold wallets? And how are they, like if they’re holding crypto in their personal wallets now, can they just put it into their self-managed super funds? People, obviously you need to open the account on this MSF name with the exchange. So people would open the account with the

07:41
exchange in Australia or overseas exchange and they will invest in crypto like again, so usually it’s like top 10 points and They can keep it in the exchange however, there are a lot of people who consider it to be too risky and they move it they can move it in cold storage or Cold wallet or hot wallet

08:06
As long as they have proof, evidence of existence of these coins at 30th of June. And we usually talk to people, talk to our clients what exact evidence the auditors would need. So as long as they can prove that these coins existed at 30th of June each year, they can use their cold wallet or hot wallet.

08:31
Unfortunately, if people have personal coins stored in the wallet and they want to transfer personal coins into self-managed superannuation funds called wallet, they cannot do that. So in order to transfer the coins, you have to sell the coins in your personal name, which will result in a capital gain or capital loss, depends on if it’s a gain or loss.

09:00
And then you have to transfer the cash into Self-Managed Superannuation Fund’s bank account. And then you can buy cryptocurrency under SMSF’s name. So one of the main requirements for Self-Managed Superannuation Fund is that all the SMSF assets, they have to be kept separate from their personal assets.

09:28
So SMSF has to have SMSF’s bank account. SMSF has to have a separate cold wallet for SMSF points. And SMSF has to open account in the exchange on the SMSF’s name as well. So all the assets, they have to be kept separately. And this is the main requirement for the SMSFs in Australia. Okay. There’s a lot of head work.

09:54
to do here. So if you’re interested in any of this stuff, I’d highly recommend seeking a financial advisor or someone such as Natalia here to guide you through this process. So it’s quite a involved process and you can’t just open up a exchange and start managing your own super fund there. So it’s very important to get this all set up correctly. Now I want to know about some more of the downsides to putting

10:19
of having a self-managed super fund and also having your crypto assets in there. And we’ll probably segue into this $3 million threshold for this unrealized capital gains tax as well. But what are the downsides here that we can see with a self-managed super fund? Yeah, this is a very good question because SMSF is not for everyone and not everyone is ready for SMSF. There is a lot of compliance and you need to understand the rules.

10:47
and legislation, superannuation legislation in order to have your own SMSF. So again, you need to have the right advisor or the right accountant who can guide you through self-managed superannuation funds rules. SMSF will require additional time. It’s not set and forget structure. You will need to manage your superannuation. You will need to make the

11:14
decisions about your self-managed superannuation fund, about your superannuation. So it’s very important to understand that you will need to get some education or guidance from the accountant or a financial advisor if we are talking about investment advice. In terms of the $3 million proposed legislation,

11:40
which is unfortunately not the case of if, it’s the case of when. So we know that the new legislation is proposed in Australia where if your balance is in the sub-region, if your balance is above $3 million threshold, you will be taxed on unrealized capital gains.

12:08
I know that SMSF Association, which I am a member of, and other accounting bodies such as CPA Australia, they’re trying to lobby against this tax because it sounds very unfair and it is very unfair. However, I personally think that we will have to…

12:34
Find a way how we will deal with this tax because like I said, I think it’s not if, I think it’s when this tax will be in place for Australians. So how this tax is going to work? Say for example, you have a balance at 30th of June and this is the individual balance. It is a not SMSF balance. SMSF can have up to six members.

13:02
So, for example, and usually CMSF would have two members, say husband and wife. So each member can have up to three million dollars in the balance and they are not going to get taxed if this member has under three million dollars. However, if your balance at 30th of June will go above three million dollars, then…

13:31
there is a tax, additional tax, which you will be paying on unrealized capital gains. It will be a difference between the balance, say for example, if we have to calculate it for 2025-2026 financial year, we will look at the balance, again, your individual balance at 30th of June, 2026. If it’s above 3 million, say 3.5 million,

13:57
We will deduct the balance which you had at 30th of June 2025, the previous year. And we will adjust it obviously for contributions and pensions. And then we will have a difference and this difference will be unrealized capital gain. And this difference will be taxed at the additional 15 % tax. OK.

14:26
Thanks for clarifying that. think a lot of people in my previous video wanted to know if it was the individual person within the funds or if it’s the fund itself. So thanks for clarifying that and thanks for clarifying exactly how the tax would actually work as well. But what about a loss? So for example, we can put crypto currencies in there. Bitcoin during COVID went down to like 7,000 per BTC. What about crypto losses? Will the government give us a tax refund?

14:54
on unrealized losses here? You wish. know, like… I don’t think so. Have you seen government giving you anything back? No, not quite. Not quite, exactly. So no, unrealized capital loss, because you’re right. If, for example, you had a balance of five million and then it went down to two million because of share volatilities or…

15:23
crypto volatility, whatever reason, you will get unrealized capital loss, which you can carry forward or will carry forward to the following years. However, you will not get a refund. So if you will get a gain in the years after capital loss in the following years, you can offset the capital loss, again, capital future, capital gains.

15:52
However, you’ll not get a refund. So unfortunately, if you will not have a gain in the future years, then you just be sitting with your loss. like I said, government doesn’t give you back money. Government usually takes your money. All right. Thanks for clarifying that. OK, so no refunds on capital gains, unrealized capital gains, losses, unfortunately. All right.

16:20
How do people actually pay for these tax liabilities then? So I know a lot of self-managed super funds have properties in them and that’s not liquid. It’s very hard to sell a property. So if there’s a gain on that property and we’ve seen prices in Sydney, for example, here in Australia just skyrocket. So I could see that possibly happening and pushing people over that 3 million threshold. Cryptocurrency assets, they’re a little bit more liquid. We can sell them on the market quite easily, but can we…

16:48
One, how do people pay for that liability if they have an illiquid asset? And then how can they use the superfund itself to actually pay for that liability? Yeah, this is another very good question, which we keep asking the government, especially if people have, like you said, people have property or a lot of farmers, have

17:10
farmland in SMSF. So if they need to pay, if they need to pay unrealized capital gain, where will they get the money from? So because this is a tax on individual, ATO will assess you when you lodge your tax return, SMSF lodges tax return, and when you lodge individual tax return, and ATO will send you assessment. You will have an option.

17:40
to pay these tax from SMSF or to pay these tax personally. So there will be an option. However, you still have to have obviously money. You still need to have cash somewhere inside of SMSF or outside SMSF to pay these tax, but there will be an option. Okay. I could see people diversifying their SMSFs to different…

18:08
types of assets. So if it’s all property, they’ll probably go into something a little bit more liquid and have more cash in there to actually pay for these liabilities if they’re over that high threshold. Pretty interesting stuff. Now I want to circle back a little bit and ask a question that came up in a Bitcoin meetup that I was at a couple of weeks ago. And this was about leveraging

18:35
the value of your self-managed superfund so you can take a loan against it. So they were talking about a way to utilize your Bitcoin. So if you have a lot of Bitcoin in there, could you use that self-managed superfund as a collateral for a loan? So you can make that Bitcoin a little bit more liquid, especially if you’re holding onto that Bitcoin for a really long time and never want to sell it. Doing this might be a way to unlock that potential value.

19:04
Is that possible with a self-managed superfund? Unfortunately, no. will wage superannuation loss again. So SMSFs are not allowed to borrow and you cannot borrow against SMSF assets as well. So the only way to borrow an SMSF is when you want to buy a property and you can borrow against that property, but you cannot borrow against your

19:33
cryptocurrency, you have cryptocurrency, Bitcoin say in SMSF, which is why margin trading is not allowed in a self-managed sub-annuation fund. This will be another breach if someone is doing it. So this will be another breach. So please be careful and you need to understand the rules. Like I said before, you need to understand the rules about SMSF. So this is a great opportunity.

19:59
But without knowing the rules, could be you can end up in a great disaster. Okay. I think a couple of people here might need to read up on the rules. So I might bring that to attention. Now, another thing that people were worried about with this 3 million threshold was that it wasn’t being indexed or it didn’t look like it within this particular bill.

20:24
Is this being indexed for inflation or is it kind of vague? What’s happening here? No, this is one of the issues. mean, there are many issues with this tax bill, but one of the issues is that it’s not indexed. Potentially, it could get indexed, but again, it has to go from the parliament. It’s a change in the bill, tax bill. As you know, it’s not easy.

20:54
to change the law when it’s already a law. So unfortunately, in the current proposal, there is no indexation. What it means, it means that we all know that the dollar today is not the same as the dollar tomorrow. So dollar tomorrow is cheaper in terms of the buying capacity than dollar today. So it means that in 10 or 20 years, $3 million threshold

21:22
is going to be like one million in today’s dollars. So again, it means, it means that today, for example, only half a million Australians, according to the government again, half a million Australians affected by this tax. However, in 10 years, it’s going to be much, much more Australians being affected by that tax because it’s not index again, because the dollar in 10 years, it’s not the same with

21:51
it’s not going to be worth the same like dollar to date. In 20 years, almost maybe like every second Australian is going to be affected by that tax. Again, unless government will index and increase the threshold. However, we have greens. Greens are talking about reducing actually $3 million threshold to $2 million threshold. Really?

22:19
Yeah, we do have lot of things going on in terms of different opinions and different lobbies. Some lobbies are against these tax and some lobbies again, for example, Greens want the threshold to become $2 million threshold because they reckon if you have $2 million in superannuation, then you’re already rich.

22:47
or wealthy and you should pay extra tax on your money. Well, yeah, two million in your superannuation is quite a lot. It’s that rainy day fund that you’re putting money way into, not your savings account or your other investments or even your family trust or whatever you might have. it is quite a decent amount of money. So they might have a point there, but still, I really do feel like this is overreached by the government, especially without that indexing.

23:17
because they’ll encroach in on more Australians because of the inflation and whatnot like you mentioned. really interesting stuff here. Now I probably should guide people to an accountant or a financial advisor for this particular question here, but I’d like to know, are there other ways around this 3 million threshold, like people moving money around?

23:43
setting up a family trust or discretionary trust or anything like that to try and avoid this impact of the new bill.

23:53
At the moment, superannuation and the self-managed superannuation fund is the most tax concessional structure in Australia. So in SMSF, for people who don’t know, in SMSF you pay maximum 15 % tax. And potentially after retirement you pay zero tax. Unfortunately, with this tax SMSF is going to become less attractive.

24:22
especially for people who do work hard and work hard all their lives and accumulated amount greater than three million, the other structures will become more attractive from tax point of view. like you said, family trust, even company will become more attractive than self-managed supernation fund. And this is, I’m a little bit sad about it because

24:50
We all know that superannuation was set up for Australians to save for their retirement. So they are self-funded, they don’t rely on the government pension, on their age pension. And we were promised in 1997 by John Howard that it was promised by liberals, but it was promised that superannuation is not going to taxed. However,

25:19
government changed and the view on superannuation changed. So I feel like a lot of people are getting ripped off by these talks, especially people, again, who have been saving and contributing additional money into superannuation environment because they’re thinking about their retirement, because they’re saving money for their retirement. And then by the end of their

25:47
working life, now they have these tax and say they are in their 50s or 60s and they have these tax which they have to pay and I think it’s very, very unfair. So, unfortunately, the SMSF will become less attractive for quite a number of people and people will move their money to other structures, family trust, discretionary trust.

26:16
companies where tax will be less than this particular tax. Okay. Sounds like a lot of people, accountants in particular are going to win out from this change if it does go through. So we’ll see how things fall into place over the next couple of months. All right. So we’ve got a lot of information here to go through. I think it’s answered a lot of people’s questions in regards to self-managed super funds, which is absolutely fantastic.

26:46
So Natalia, thank you so much for joining me on the podcast episode and talking us through everything we need to know, especially all the crypto holders here that are interested in this kind of thing. How can we find out more? Where do we go to reach out to you and find out how to set up the Self-Managed Superfund? Thank you, Peter, for inviting me. So I’m always happy to share my knowledge with people.

27:12
If you want to find out more about self-managed superannuation funds or if you need more guidance on how to invest your money in a self-managed superannuation fund, you can go and book an appointment with myself. You can go on the website www.smsfconsulting.com.au. We have a free 15-minute appointment available. This is where we can start. I can find out a little bit more about yourself and I can…

27:41
assist you with fast and quick questions. Otherwise, if you are looking for an accountant or looking for a SMSF specialist, advisor who can guide you and hold your hand during your Super Nation investment and SMSF journey, again, you’re welcome to move to EasySuper and we can assist you. Awesome. Thank you so much.

28:07
So if you have any questions, leave them down below as well. The comment section will afford them all over to Natalia as well so she can help answer those particular questions. And if you want to find out anything else, I’ll leave all the links in the video description down below so you can contact Natalia and find out a little bit more about how to sell a superfund. But Natalia, thank you so much for joining me on this episode. It’s been a pleasure talking to you. Thank you very much, Peter. Thank you for inviting me.