There was a time when it looked like self-managed superannuation funds (SMSFs) weren’t going to be able to invest in art and other collectables after the Cooper Review recommended a ban on holding these assets.
But this was not accepted as a recommendation, albeit with some tightening of the requirements for SMSFs who invest in them.
Collectables and personal use assets are set out under the Superannuation Industry (Supervision) Act 1993 (Cth) to be artwork, jewellery, antiques, artefacts, coins, medallions, postage stamps or first day covers, rare folios, rare books, rare manuscripts, memorabilia, wine, spirits, motor vehicles, recreational boats and memberships of sporting or social clubs.
It’s worth noting, that whilst bullion coins are considered to be a collectable where they have a value in excess of face value and metal content, gold bars are not. As a commodity, some SMSF trustees have started to consider bullion as awareness increases of the value of precious metals held as an investment asset.
The superannuation regulations also outline how SMSFs can own or use artwork and collectables.
Rules in relation to the use of or ownership of collectables and personal use
1. Not stored in private residence
Collectables and personal use assets cannot be stored at the private residence of any related party of the SMSF, specifically at the primary residence of an individual. This does not refer to a location such as a place of business or specially constructed storage facility. However, whilst it is possible to store collectables in the business premises of a related party, they cannot be placed on display.
2. Reasons for storage in writing
An SMSF must also document why they stored the investment at a particular location, with the documentation being kept on file for 10 years.
3. Maintain insurance
SMSF trustees must also ensure the asset is insured in the name of the super fund and the insurance must be in place within seven days of the asset being purchased. Sensibly, this rule doesn’t apply to sporting or social club memberships.
4. Valuation by independent party
When a super fund sells any piece of artwork or collectable to a related party, the super fund must get an independent valuation of the item and the agreed sale price cannot be less than that valuation.
5. Not leased to a related party
Collectables and personal use assets must not be leased to any related party of the SMSF. A related party of the SMSF includes the members of the SMSF, their relatives and any partnerships, partners of partnerships (if a member is in partnership with them), trusts and companies that members of the SMSF control.
The ATO has warned it will strongly police rules prohibiting the leasing of collectables to related parties and ensuring they are independently valued. Please refer to the ATO website for further information.
You also need to consider whether a collectable or personal use asset conforms to your SMSF’s written investment strategy, particularly given that collectables are generally illiquid. Consider the impact on your SMSF’s capacity to manage its cash flow requirements and provide timely access to liquidity to meet both its expenses and member benefit liabilities.
For more information, please call 132 135.
This information is general in nature and does not take into account your personal needs, objectives or circumstances and therefore, before acting on it, you should consider whether it is appropriate for you. This article provides an overview or summary only and it should not be considered a comprehensive statement on any matter or relied upon as such. This article may contain material provided by third parties derived from sources believed to be accurate at its issue date. While such material is published with necessary permission, no company in the Westpac Group accepts any responsibility for the accuracy or completeness of, or endorses any such material. Except where contrary to law, we intend by this notice to exclude liability for this material.
BT Portfolio Services Ltd ABN 73 095 055 208 AFSL 233715 (BTPS) is the operator of BT Panorama (the investor directed portfolio service). BT Funds Management Limited ABN 63 002 916 458 AFSL 233724 (BTFM) is the issuer of BT Cash. Westpac Financial Services Ltd ABN 20 000 241 127 AFSL 233716 (WFSL) is the issuer of BT Managed Portfolios (together, the Panorama Products). An Investor Guide is available for BT Panorama and a PDS is available for BT Cash and BT Managed Portfolios and can be obtained by calling 1300 554 267, or visiting BT SMSF. You should obtain and consider the relevant disclosure documents before deciding whether to acquire, continue to hold or dispose of interests in the Panorama Products. In addition, BTPS is also the provider of the SMSF Establishment Service and the SMSF Administration Service. The Guide and Terms and Conditions for each of these services are available by contacting BTPS.
Neither BTPS, BTFM nor WFSL can give tax advice. Any tax considerations outlined in this article are general statements, based on an interpretation of the current tax law, and do not constitute tax advice. The tax implications of BT SMSF can impact individual situations differently and you should seek specific tax advice from a registered tax agent or registered tax (financial) adviser. © BT Financial Group – A Division of Westpac Banking Corporation. Information current as at 30 August 2017.