How do I invest my SMSF in Crypto using Coinstash?

Yes, Coinstash is fully compliant with Australian regulations including being registered with AUSTRAC.  Digital currency exchange providers must be registered and enrolled with AUSTRAC who regulate businesses to comply with the anti-money laundering and counter-terrorism financing laws and regulations.

SMSF Australia do not recommend any specific cryptocurrency platform, but we recognise the increased interest SMSFs have in investing in cryptocurrencies.  The ATO estimate that SMSFs have invested over $3bil in crypto investments. This article provides general information about how an SMSF can invest into a crypto platform using Coinstash.

Coinstash, established in 2017, is an Australian-owned and operated company. Its financial statements are audited annually by Hall Chadwick, a leading accounting firm in Australia. In addition, the auditor performs independent reviews of internal controls to ensure they are sufficient and verifies that client assets are properly reconciled as of June 30th each year.

There are over 1,000 cryptocurrencies that can be traded on their platform.

The SMSF auditor needs to verify cryptocurrency holdings, confirm ownership and market value as of 30 June, and review transactions to ensure funds come directly from the SMSF with no related party involvement.

Coinstash provide the following reports to be downloaded to a PDF report or a CSV spreadsheet which can be uploaded into the fund’s accounting software:

• Annual statement showing the SMSF as the type of account and the name of the SMSF with the balance of each type of currency held as at 30^th June and the market value using the Coinstash sell price.
• Cash statement tracking the cash coming in and cash going out matching to the SMSF bank account for transparency.
• Transaction account showing details of the date of each transaction, type of event i.e. buys, sell, swap, transfers, rewards and bonuses, type of crypto asset, amount, fees and wallet movements.

The reports are available online, and an adviser portal has been developed for accountants and other professionals to reconcile cryptocurrency transactions and cross-reference them with SMSF bank statements, serving as a comprehensive audit trail for the SMSF auditor. Additionally, a controls report is currently under development, which is anticipated to provide the SMSF auditor with an external audit opinion to further support SMSF compliance.

Cryptocurrencies are stored in wallets, which can be either hot (web-based) or cold (physical devices similar to a USB stick). Coinstash manages client wallets, but an SMSF may choose another provider. If Coinstash does not manage the wallet, the fund’s SMSF auditor may need access to the wallet records and key.

How do you set up a Coinstash account?

1. Set-up your SMSF – contact SMSF Australia and we will take you through the set-up process which includes completing a form to collect personal details of the members and naming of the SMSF and the corporate trustee and working with the SMSF lawyers to complete the fund’s trust deed and other compliance documents and then registering the fund with the ATO, providing you with an Electronic Service Address (ESA) and finally assisting you to set up a bank account.
2. Set-up an SMSF bank account which allows the fund to transfer cash to and accept withdrawals from Coinstash. It is important to pick a Crypto friendly bank as many are now blocking transfers to and from Crypto exchanges. We recommend checking out the ANZ V2 Plus account which our team can help clients setup, although worth noting that we have no ongoing access post helping clients to setup to negate any security concerns.

• The title of the SMSF bank account must be in the name of the SMSF trustee and designated for the SMSF i.e. “Jones Pty Ltd ATF Barry Jones SMSF”
• The SMSF bank account must match the title registered with Coinstash
• A lot of the major banks will not support SMSF investment in crypto platforms due to the explosion of scams. Banks which are known to be crypto friendly include St George, Australia Bank, ANZ.  Other banks which have come to our attention as allowing crypto trading for SMSFs, in some cases, include NAB, Bendigo Bank, and Heritage Bank. Some banks restrict the amount of cash for crypto transfers or delay a transaction until they are satisfied it is not fraudulent or subject to a scam which can be a quick call from the bank or subject to further detailed questioning.

SMSF Australia do not endorse any specific bank. It is important to talk to the bank and review their policies to confirm if they allow SMSFs to engage in crypto trading. Banks do look more favourably on crypto exchanges which are registered with AUSTRAC.

3. Apply for an SMSF account with Coinstash to begin the onboarding process.

• Provide the details of all members
• Provide the name of the corporate trustee or the ACN
• Upload a copy of your certified SMSF trust deed
• Book a 20 minute call with the onboarding team

4. Submit SMSF details to complete the registration
5. Provide identity verification of the members

• Know your customer (KYC) process is required by AUSTRAC
• Coinstash will prompt you to initiate the verification process
• Information and documents confirming SMSF member details and the corporate trustee (if applicable) are required
• The onboarding team will review and verify the documents submitted
• To ensure compliance with AUSTRAC and security of the SMSF account and the platform your SMSF account may be flagged due to an unusual or suspect transaction which is standard procedure when dealing with crypto assets. The SMSF account may be temporarily halted from withdrawing funds, but this is quickly reinstated when the re-verification process is completed.

Generally, the personal documents required to verify a member’s identity include:

• a certified or original driver’s license with photo ID or an Australian passport; or
• medicare card or an Australian birth certificate or an Australian citizenship certificate and a utility bill or a bank statement or motor vehicle registration

Coinstash will let you know the documents they require.

Tax & Cryptocurrency

Capital gains tax applies to transfers and disposals of crypto transactions. Crypto cannot be acquired from a member of the SMSF so care is required to ensure crypto from a personal account is not accidentally transferred to the SMSF account. Coinstash block transfers from personal accounts to SMSF accounts to avoid this issue. It is crucial to ensure the fund’s trust deed allows for crypto investments and the class of investment is included in the fund’s investment strategy.

Coinstash provides “Frequently Read Articles” on their website, which is both useful and highly recommended.

Disclaimer – Coinstash & SMSFs

SMSF Australia does not endorse or suggest any particular cryptocurrency exchange platform. Frequently, clients inquire about SMSF investing in cryptocurrency; therefore, we offer broad guidelines on utilising a crypto platform for such investments.