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How to work with the new collectible rules
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.

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.

The assets covered include, artwork, jewellery, antiques, artefacts, coins, medallions and bank notes, postage stamps and first day covers, rare folios, manuscripts and books memorabilia, wine or spirits, cars, recreational boats, memberships of sporting or social clubs, and other assets used or kept primarily for person use or enjoyment (excluding land).

The rules
With most physical or non-financial assets there are several steps that need to be able to be verified for ownership, compliance with the superannuation legislation and satisfaction for audit. These can be categorised as
  • proof of acquisition
  • proof or recognition of ownership
  • 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

For collectibles, there are now a series of additional specific investment standards that are to be met by the 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.
Each of these standards carries a separate strict liability penalty of up to $1,700.

What this means
This will mean that as part of the acquisition of a collectible these aspects of storage, use and insurance will need to be verified and documented to satisfy the auditor.

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.

Disclaimer: The information contained in this document is given in good faith and has been prepared from information believed to be accurate and reliable. This information is of general nature only and based on Multiport’s interpretation of the present laws but no guarantee is provided. This document is not designed to be a substitute for financial or investment advice and should not be relied upon as such. Reproduction of material in this document is only permitted with approval of the author.
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