SMSFs, Collectables & Personal Use Assets

What are collectables and personal use assets?

jewellry

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. Collectables and personal use assets include:

  • artwork
  • jewellery
  • antiques
  • artefacts
  • coins, medallions or bank notes
  • postage stamps or first day covers
  • rare folios, manuscripts or books
  • memorabilia
  • wine or spirits
  • motor vehicles
  • recreational boats and;
  • memberships of sporting or social clubs.

What is Artwork?

within the meaning of the Income Tax Assessment Act, 1997 (ITAA97) Artwork is defined as a painting, sculpture, drawing, engraving or photograph, a reproduction of such a thing, or property of a similar description or use. Coins and bank notes are collectables if their value exceeds their face value. Spirits includes, but is not limited to, whiskey, gin, vodka, tequila, brandy and rum. Motor vehicles include, but are not limited to, motor cars and motor cycles.

So, what are the rules?

As previously noted, it is important to remember the rules do not replace or supersede any existing requirements imposed by superannuation law in respect of your fund’s investments. That is, your fund is still required to comply with all existing legislative requirements, including the sole purpose provisions. The rules apply to all new investments in these assets made on or after 1 July 2011. For assets acquired before 1 July 2011, you have until 1 July 2016 to make sure they are being kept by the fund in accordance with the rules. If by 1 July 2016 the assets do not comply with the regulations, penalties may be imposed. The regulations require that:

  • collectables and personal use assets must not be leased to any related party of the funds
  • collectables and personal use assets must not be stored or displayed in the private residence of any related party of the fund
  • trustees must make a written record of the reasons for the decisions on where to store the collectables and personal use assets and keep the record for 10 years
  • trustees must ensure that collectables and personal use assets (other than a membership of a sporting or social club) are insured in the name of the fund within seven days of acquisition
  • collectables and personal use assets cannot be used by any related party of the fund
  • the transfer of ownership of collectables and personal use assets to a related party of the self-managed super fund must be done at a market price determined by a qualified independent valuer.

Further information may be found on the ATO‘s website.

by Sue Whitehouse