New rules governing Self-Managed superannuation Fund Investments in Collectables take effect from the 1 July 2016.
Collectables – What are they ?
The definition of collectables is contained in Sec62A of the Superannuation Industry (Supervision) Act. It includes antiques, artwork, artefacts, coins, banknotes, jewellery, medallions, manuscripts or books, rare folios, memorabilia. It also includes motor vehicles or recreational boats, postage stamps and first day covers, membership of sporting or social clubs and personal use assets.
The Rules for Collectables – What are they ?
The six rules relating to collectables are:
- The asset must not be leased to a related party.
- The asset must not be stored in a private residence of a related party.
- A decision regarding asset storage must be documented and kept for 10 years.
- The asset must be insured in the SMSF trustees name.
- The asset must not be used by a related party.
- A transfer to a related party requires an independent valuation.
ALL trustees of Self-Managed Superannuation Funds must comply with these Rules by 30 June 2016.
Insurance must be arranged within 7 days of the trustee acquiring the collectable. This applies regardless of the value of the item.
Penalties for Non-Compliance
Failure to comply with any of the rules incurs 10 penalty units per offence. One penalty unit is currently $170.00. This means that a trustee will incur a $1700 penalty. It is recommended that trustees review the fund situation NOW, as there may be insufficient time for corrective action at a later date.
What Self Managed Superannuation Funds Must Do Now.
The SMSF trustee must review any collectables held in an SMSF and determine how the fund will comply by 30 June 2016. If it is not possible or practical to comply with the rules then the fund will need to dispose of the asset before 30 June 2016.
Trustees should undertake the following:
- Review storage arrangements to ensure they meet the requirements and are documented.
- Ensure that the collectable is insurable in the name of the fund trustee and insure all collectables.
- Ensure that there is no personal use of the collectable.
For more help with Self-Managed Superannuation Funds get in touch with Brander Accountants.