Collectibles and changes from 1 July 2016
Does your SMSF own artwork, jewellery, coins, vintage cars, wine collections or antiques to name a few of the major items deemed collectibles? If these items were purchased before 1 July 2011 you might not be aware that significant changes are taking effect from 1 July 2016.
From 1 July 2016, any collectible owned by an SMSF must adhere to the new rules:
- The collectibles are not to be stored at the SMSF trustees residence;
- SMSF trustee or a related party is not permitted to lease or use any of the collectibles;
- The collectible MUST be insured by its’ own separate policy;
- Document and minute the storage decision by the trustees;
- If the collectible is to be sold to an SMSF trustee or related party then a valuation by a qualified independent valuer must be sought to determine the market value.
The Collectibles are not to be stored at the SMSF trustees residence.
This is where the ATO are circumventing the “I store the painting at home, but of course it’s in the safe – wink, wink” conversation. As the Auditors, or the ATO cannot be at your home to verify the existence of the collectible or that it truly is not being used, the decision was made to remove the temptation and remove the collectible from reach. Therefore, the new legislation states that any collectible must not be stored the SMSF trustees residence.
SMSF Trustee or related party is not permitted to lease or use the collectible.
Following on from not storing the collectible at home, the ATO wanted to make it clear that using the collectible is not ok. Doesn’t matter that the vintage car on display at your car restoring business would generate significant interest in your business – unfortunately, it’s simply not allowed.
The Collectible must be insured.
A collectible CANNOT be insured under a trustees own general home and contents policy. Whilst this requirement may be difficult to comply with, it is definitely a must from 1 July 2016. Think of this way, you wouldn’t expect the parking lot to insure your car if it was parked in their carpark while at work, same with a collectible.
The collectible belongs to the SMSF, purchased by your retirement funds and if something should happen where you would need to claim on insurance, then the payout from that insurance policy also belongs to the SMSF.
There are not too many specialist insurers in the market place, however one provider is Self Super Insurance. For further information please refer to the website: http://selfsuperinsurance.com.au/art-collectibles-insurance/
Document and minute the storage decision.
A simple document stating the reason why you stored the collectible at which location.
Purchase by related party of collectible
As an SMSFs’ sole purpose is to provide for your retirement, when you retire, the ATO want to ensure that if you decide to sell collectibles from your SMSF to either yourself or any other related party, that the sale price is market value.
The ATO have determined that the best person to determine what the market value is for collectibles, a qualified independent valuer is necessary to state what that sale price should be.
In summary, Collectibles can be owned by the SMSF, however, the ATO want to ensure that the trustees or members of an SMSF treat the artwork, coin, vintage cars etc as an investment for the future retirement of members, not as a perk on the way too retirement.