In a notable trend, Australians are increasingly turning to cryptocurrency for their retirement planning, with self-managed retirement funds experiencing a remarkable 400% surge in cryptocurrency allocations over the past four years. This growth has outpaced traditional stocks and bonds, according to recent statistics released by the Australian Tax Office (ATO) on November 26.
As of the quarter ending in September, the approximately 612,000 self-managed super funds (SMSFs) collectively hold around $658.6 million (992 million Australian dollars) worth of cryptocurrencies. This represents an impressive 400% increase from the same quarter in 2019 when crypto holdings were just under $131.5 million (198 million AU).
Self-managed super funds, also known as private superannuation funds, empower individuals in Australia to independently manage and invest their retirement funds. The ATO oversees this retirement scheme to ensure compliance with superannuation laws.
Danny Talwar, Head of Tax at Koinly, a crypto tax provider, described cryptocurrency as the “largest growing asset class in SMSFs.” Despite this growth, crypto allocations saw a slight 0.8% dip from the quarter ending in June 2023, along with a 2.4% drop compared to the previous year.
Listed shares, constituting the largest allocation category in SMSFs, grew by 28% during the same period. In contrast, allocations to debt securities like bonds declined by 5.8% over the past four years.
Although the current crypto holdings in self-managed funds are 38% lower than the all-time high recorded in June 2021 during the previous crypto bull market, the trend of holding crypto within super funds continues to rise. Crypto exchanges in Australia are now offering crypto superannuation products to cater to this growing demand.
It’s important to note that cryptocurrency currently accounts for only 0.1% of the total net assets held in Australian SMSFs at the end of the last quarter. Talwar highlighted that smaller-sized SMSFs tend to have a larger allocation to cryptocurrencies in their portfolios.
While the trend is positive, Talwar cautioned that investors must adhere to specific rules and regulations, emphasizing that the SMSF strategy should focus on providing retirement benefits. Compliance, audits, and maintaining a clear separation between SMSF holdings and personal holdings are crucial to avoid complications.
It’s noteworthy that detailed information about the specific cryptocurrencies held by SMSFs and their gains or losses remains unknown, as the ATO does not provide information on portfolio holdings or performance.
