Collectables and other assets aren’t a large proportion of the assets that SMSF’s invest in, actually less than 3% of total SMSF assets, as the ATO reports see here. If considering collectables, you must keep it legal and be aware that new rules apply from 1 July 2011. Collectables, other and personal use assets acquired before 1 July 2011, have a transition period until 1 July 2016 to comply with the new rules.
Section 62A of the Superannuation Industry (Supervision) Act 1993 (SIS Act) provides that the regulations may make rules in relation to trustees of self-managed superannuation funds (SMSF) making, holding and realising investments involving collectables and personal use assets.
Assets that are taken to be collectables and personal use assets are defined in Regulation 13.18AA (1) and include:
- Artwork (within the meaning of the Income Tax Assessment Act 1997 (ITAA97));
- Jewellery & antiques;
- Artefacts & coins, medallions or bank notes;
- Postage stamps or first day covers;
- Rare folios, manuscripts, books wine or spirits;
- Motor vehicles & recreational boats;
- Memberships of sporting or social clubs.
What the regulations require:
- Keeping arm’s length – separate from personal and business assets;
- Acquisition by a related party to be at market value determined by a qualified independent valuer;
- No enjoyment/use now, or benefit to trustees or their related parties, eg no display of artwork in house or business, no driving antique cars even to a service (an unrelated party must do it);
- Leasing to galleries is permitted if no related parties are involved;
- Insure items within 7 days of acquisition and in the name of the SMSF, so gallery insurance will not suffice and be aware that insurance companies will have a say in how the item is stored
- Written record of reasons for decisions on storage and keep records for 10 years.
So when considering assets other than the traditional shares, cash, term deposits and managed funds, always know the rules, keep it legal and seek advice about collectables, other assets and personal assets. As always, include then in your investment strategy, and have all trustees sign it.