With all the excitement of the North Queensland Cowboys winning their first NRL premiership it may be tempting to snap up some memorabilia using your Self Managed Superannuation Fund (SMSF). But, before you get caught up in a bidding war for that signed jersey, it is important to be aware of the conditions under which Collectibles & Personal Use Assets may be owned by a SMSF especially in light of the rule changes made in 2011 which take full effect from 1 July 2016.
What are considered Collectibles & Personal Use Assets?
According to the Superannuation Industry (Supervision) Act 1993, these assets include:
- Coins or medallions
- Postage stamps or first day covers
- Rare folios, manuscripts or books
- Wine or spirits
- Cars or motorbikes
- Recreational boats
- Memberships of sporting or social clubs
What are the new rules?
An SMSF must satisfy the following requirements for any Collectible or Personal Use Asset owned:
- The asset cannot be leased to a related party
- The asset cannot be stored in the private residence of a related party but can be stored in an office of a related party as long as it’s not on lease and not on display
- The decision of where to store the asset must be documented
- The asset must be insured within 7 days of acquisition
- The asset cannot be used by a related party
- If the asset is disposed of to a related party, it must occur at market price assessed by a qualified independent valuer
When do the new rules take effect?
These rules currently apply to any of the specified assets purchased after 1 July 2011 but there is a transition period for assets that were already owned by a fund at that date. This transition period ends on 30 June 2016 from which point ALL Collectibles and Personal Use Assets must satisfy the above conditions.
If the conditions are unable to be met then it may be necessary to dispose of the asset to ensure the SMSF remains compliant.
What about bullion?
Whether bullion is classed as a Collectible or not is dependent on the form the bullion is in. Bars are not treated as Collectibles however, if the bullion is in coin form, then it will be classed as a Collectible if the value of the coin exceeds the face value of the coin AND the value of the metal content. This important difference is often not considered when purchasing bullion and can lead to compliance issues.
Any other considerations?
Care should always be taken when investing in Collectibles and Personal Use Assets in a SMSF to not only comply with the new rules outlined above, but also that the investment is made for the Sole Purpose of providing retirement benefits for the members and is in line with the SMSF's investment strategy.
Should you have any questions regarding current or future Collectibles and Personal Use assets for your SMSF please contact one of our Superannuation Partners, Clive Todd or Chris Campbell on 07 3218 3900.