The Australian Taxation Office has recently confirmed its view with regard to self managed superannuation funds (SMSFs) that invest in collectables and the stringent rules that must be complied with from 1 July 2016.
These assets tend to be of a limited supply and as such, there is an assumption that over time they will increase in value, although they do go through their own value cycles. There is nothing in the SIS Act (1993)¹ that prevents trustees from investing in these types of assets, however there are some regulations around how you invest and what you need to do to comply.
Specifically, SMSF trustees who invest in collectables or personal use assets must:
These rules already apply to all SMSFs where collectables or personal use assets were acquired on or after 1 July 2011. Collectables that were owned by the SMSF (as at 1 July 2011) have until 1 July 2016 to comply with the rules.
Above all, from an investment perspective you need to have a good understanding of:
If not, they can turn into very high risk ventures that can decimate the value of your fund.
If you are an industry expert in any of these investment areas, it makes sense that you would invest in an area you know well. If you’re not and want to invest in collectables, we recommend that you engage an expert who can guide you. You should also ensure that your trust deed has provision to invest in collectables and it is included in your fund’s written investment strategy.
The ato.gov.au website has more information or contact our office.
¹ Superannuation Industry (Supervision) Act 1993