Self-Directed IRA (SDIRA) in 2025: What Australians Should Know

Self-Directed IRAs (SDIRAs) are sparking conversations among Australians keen to diversify their retirement nest egg. While the concept is rooted in US retirement law, more Australians are taking notice as global investment options—and rules—shift in 2025. Is it time to go beyond traditional superannuation and explore the wider world of SDIRAs?

What Is a Self-Directed IRA?

A Self-Directed IRA is a type of individual retirement account that lets you invest in a much broader range of assets than standard IRAs or Australian super funds. While traditional IRAs typically limit you to stocks, bonds, and mutual funds, SDIRAs open the door to:

• Real estate (residential, commercial, and even overseas property)
• Private equity and venture capital
• Cryptocurrency and digital assets
• Precious metals
• Private loans and promissory notes

This flexibility is a double-edged sword: it allows for creative, potentially lucrative strategies, but comes with extra risks and complexity.

Why Are Australians Interested in SDIRAs?

Superannuation remains the backbone of retirement planning in Australia. However, the rise of alternative investments and the globalisation of wealth management have piqued local interest in SDIRA-style accounts. Here’s why:

• Global Asset Access: Some Australians with US ties (dual citizens, expats, or those investing internationally) can use SDIRAs to tap into US and global assets not available in super.
• Alternative Asset Popularity: 2025 has seen a surge in crypto, private real estate, and alternative lending platforms. SDIRAs let investors back these trends directly.
• Tax-Deferred Growth: Like super, SDIRAs offer tax advantages—profits inside the account grow tax-deferred, potentially boosting long-term returns.

But SDIRAs aren’t for everyone. They come with strict rules, especially for those navigating cross-border tax and compliance issues.

2025 Policy Updates and Regulatory Trends

This year has brought notable changes to the SDIRA landscape, particularly for Australians with US connections:

• US Compliance Crackdown: The IRS has increased scrutiny of SDIRAs holding digital assets and foreign property. Regular reporting and new due diligence requirements are in effect for 2025, making it essential to keep meticulous records.
• Australian Disclosure Rules: The ATO now requires Australians with offshore retirement accounts—including SDIRAs—to disclose holdings more transparently. Failing to do so can trigger hefty penalties or double taxation.
• Crypto Asset Custody: Many SDIRA custodians have updated their terms to comply with enhanced anti-money laundering (AML) and know-your-customer (KYC) protocols. Investors must vet their providers and confirm assets are held securely.
• Super vs. SDIRA: While some Australian SMSFs (Self-Managed Super Funds) offer similar flexibility to SDIRAs, they remain subject to local rules. Cross-border investors need to tread carefully to avoid regulatory pitfalls.

Risks and Considerations Before You Dive In

SDIRAs are not a “set and forget” investment. Here’s what to keep in mind:

• Complex Administration: You must use a US-approved custodian and follow strict rules on prohibited transactions. One misstep—such as self-dealing or using assets for personal benefit—can disqualify your entire account.
• Liquidity Risks: Assets like real estate or private equity are illiquid. If you need to take a required minimum distribution, you may be forced to sell in a down market.
• Tax Traps: Australians with US SDIRAs face complex tax reporting and potential double taxation if accounts aren’t structured properly. The 2025 ATO/IRS data-sharing agreement has made non-disclosure riskier than ever.
• Fraud Risk: The US Securities and Exchange Commission (SEC) warns that alternative investments in SDIRAs are frequent targets for scams. Due diligence is essential—only work with licensed custodians and reputable asset managers.

For most Australians, a well-structured super or SMSF will offer comparable flexibility with fewer headaches. But if you have US ties or are a sophisticated investor, SDIRAs can unlock new strategies—just proceed with caution.

Real-World Example: Cross-Border Investing in 2025

Meet Emma, an Australian/US dual citizen. In 2025, she rolls over her US 401(k) into a SDIRA, investing in both US rental properties and Bitcoin. She chooses a custodian with robust digital asset infrastructure and files the required IRS and ATO forms. By keeping her assets within the SDIRA, Emma defers tax on rental income and capital gains. However, she must file extra paperwork each year, and closely monitor both US and Australian reporting deadlines.

How to Get Started (and Stay Compliant)

If you’re eligible and ready to explore SDIRAs, follow these steps:

1. Confirm your eligibility—Australian residents usually need US tax status to open an SDIRA.
2. Choose a reputable, IRS-approved SDIRA custodian. Look for experience with global clients and robust compliance controls.
3. Decide on your asset mix, balancing potential returns with liquidity and compliance risks.
4. Stay up-to-date on 2025 reporting requirements for both the US and Australia.
5. Consult with cross-border tax and retirement specialists before executing large or unusual transactions.

For Australians without US connections, consider exploring SMSFs for similar alternative investment access—just under local rules.