Deadline looms for SMSFs and collectibles
Written on the 28 February 2016
Does your self-managed superannuation fund (SMSF) own a motor vehicle, artwork, wine, coins, jewellery or other collectibles?
More stringent rules for how these collectible and personal use assets are managed come into effect for all funds from 30 June 2016. While it's important for all SMSFs to ensure that they are compliant with the rules, funds with collectibles purchased before 1 July 2011 have had a grace period to get their house in order. This grace period ends on 30 June 2016.
There is around $407 million worth of these collectible and personal use assets sitting in SMSFs in Australia. The Tax Office's main concern is that it's really easy for fund members to forget that these assets like artwork and cars - are owned by the fund and must be held for retirement purposes. That means members of the fund (or anyone related to them) can't use or enjoy that asset.
If you have these assets in your fund (or are looking to acquire them), here's what you need to ensure:
A few issues come out of these requirements. Sometimes insurance is difficult or impossible to get for collectible assets. If you can't secure insurance, the asset may need to be sold. If a collectible asset needs to be sold because the rules can't be met, the sale process can sometimes be protracted this could be an issue if you need to sell the asset pre 30 June.
Before your fund acquires a collectible asset, it's also important to ensure that the fund Trust Deed allows for collectibles to be acquired, the Investment Strategy of the fund allows for the collectible to be acquired, and that the sole purpose of acquiring the collectible is to provide retirement benefits for members.
What is a collectible and personal use asset?
A common example is motor vehicles. The definition of a collectible includes motor vehicles such as utes, not just classic cars that are generally considered collectors items.
When the Tax Office talks about collectibles, they mean: artwork including paintings, sculptures, drawings, engravings and photographs; jewellery; antiques; artefacts; coins, medallions or bank notes (coins and banknotes are collectables if their value exceeds their face value, and bullion coins are collectables if their value exceeds their face value and they are traded at a price above the spot price of their metal content); postage stamps or first-day covers; rare folios, manuscripts or books; memorabilia; wine or spirits; motor vehicles and motorcycles; recreational boats; and, memberships of sporting or social clubs.