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Does your self-managed super fund invest in collectables or personal use assets?

New rules in relation to investment by Self-Managed Super Funds ('SMSFs') in collectable and personal use assets have commenced on 1 July 2011! These are the result of the Super System Review in 2010, which recommended a blanket ban on holding collectable and personal use assets by SMSFs. While the government rejected this recommendation, the new rules include some much stricter requirements and significant penalties, if breached.

What are collectable and personal use assets?

  • Artwork (e.g. painting, sculpture, engraving, photograph, etc)
  • Jewellery, antiques and 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
  • Memberships of sporting or social clubs

When do the new rules apply?

  • For assets purchased before 1 July 2011, the new rules do not commence until 1 July 2016.
  • The new rules will apply to any collectable and personal use assets acquired on or after 1 July 2011.

What are the new rules?

  1. Collectable and personal use assets cannot be leased to a related party. Entering a "lease arrangement" with a related party is also disallowed.
  2. Collectable and personal use assets must not be stored in the private residence of a related party of the super fund. Storage on business premises is allowed.
  3. Any decisions relating to storage of these assets must be documented and records kept for at least 10 years!
  4. Collectable and personal use assets must be insured in the name of the super fund within 7 days of acquisition.
  5. A related party cannot use collectable and personal use assets owned by a SMSF.
  6. Collectable and personal use assets can only be sold to a related party at the asset's market value, as determined by an independent valuer.

What are the penalties for breaching the new rules?

Breaching of any of the above rules will attract a penalty of 10 penalty units, i.e. $1,100, for each rule breached. For example, if a SMSF acquired a collectable asset after 1 July 2011 and the trustees have not documented any decisions regarding the storage of the asset and it is being held at a related party’s residence, that constitutes a breach of two rules and the penalty imposed would be $2,200.

Please contact your Ruddicks adviser if you are considering investing in collectable or personal use assets in your SMSF to ensure your fund complies with the new rules.

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