Collectibles and Personal Use Assets - General Compliance Information

As a result of the Cooper review, rule changes have been implemented in relation to the requirements for the ownership of collectible and personal use assets by SMSFs.

These rules will apply to any specified asset acquired after 1 July 2011 and will also apply to assets owned prior to this date with effect from 1 July 2016. 

What assets are considered Collectibles and Personal Use Assets?

The types of assets that are covered by these requirements are outlined in the SIS Act and the rules pertaining to the ownership and usage are covered in SIS regulations.  

Collectibles and Personal Use Assets include the following:

  • artwork (within the meaning of the Income Tax Assessment Act 1997)
  • jewellery
  • antiques
  • artefacts
  • coins or medallions
  • postage stamps or first day covers
  • rare folios, manuscripts or books
  • memorabilia
  • wine or spirits
  • cars or motorbikes
  • recreational boats
  • memberships of sporting or social clubs

What are the new rules?

There are now a series of specific investment standards that are to be met by the SMSF in addition to the usual documentation and procedural requirements for standard assets purchased in a SMSF.  These are:

  • the asset cannot be leased to a related party
  • the asset cannot be stored in a private residence of a related party
  • there must be documented decision of asset storage
  • the asset must be insured within 7 days of acquisition in the SMSF’s name
  • the asset cannot be used by a related party, and
  • if the asset is disposed of to a related party, it must occur at market price assessed by a qualified independent valuer.

As part of the acquisition of a collectible or personal use asset, the aspects of storage, use and insurance will need to be verified and documented to satisfy the auditor. 

For completeness, the usual documentation and procedural requirements are:

  • proof of acquisition and recognition of ownership ie. purchase documentation
  • associated transaction aspects including income production or capital appreciation and costs of maintenance
  • confirmation the asset or its acquisition does not breach the superannuation investment standards
  • confirmation the asset conforms with the SMSF’s written investment strategy
  • ongoing valuation of the asset for both accounting and member interest purposes (at least every 3 years)

 

What does this mean?

These rules will apply to any specified asset acquired after 1 July 2011 and will also apply to assets owned prior to this date with effect from 1 July 2016. 

For those SMSFs with collectibles acquired prior to 1 July 2011 the trustees will need to consider whether or not the new conditions are being met or will be able to be met prior to 30 June 2016. If this is not the case then disposal of those collectibles will be the only course available to the SMSF if it wishes to maintain its complying status.

Insurance

We recommend Self Super Insurance for any enquiries / quotes for artwork and collectibles insurance for your clients SMSFs.


Failure to comply with the new rules will attract penalties.  Each of these standards carries a separate strict liability penalty of 10 penalty units ($1,800). 

The ATO has comprehensive information available on it's website here: Collectables and personal-use assets

 

SIS Regulation 13.18AA is the relevant regulation covering the above.

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