Sadly, from 1 July 2016 your client’s SMSF may no longer be able to hold investments in collectables and personal use assets. Tougher, stricter rules will apply.
New investments were caught from 1 July 2011, but by 30 June 2016 the new rules will apply to all.
What investments are caught?
A complete list is set out in the regulation but all the usual offenders – artwork, wine, cars, antiques and jewellery – are caught.
Interestingly, the ATO advises it will not apply to precious metals held in the form of coins whose value does not exceed the spot metal price.
What are the new rules?
- No longer can the client say that they store them in their residence but never use them for personal enjoyment. Items must be stored externally from the home.
- Surprisingly, you can store them in non-residential premises of a related party – but they can’t be leased, used or displayed.
- A written decision must be made as to storage location.
- The item must be covered by an insurance policy in the name of the Fund within seven days of purchase.
- If the item is sold to a related party, it must be based on a written valuation by a qualified person.
Ramifications?
Do we ever doubt our clients telling us they never display artwork or use the piece of jewellery on a night out?
Hmm… Well these changes will be dramatic and will, in a lot of cases, result in the SMSF needing to dispose of the investment.
This raises questions about how this can be managed:
Can it be transferred out on paper to the member? How is this legally achieved? What if there is no available valuer?
Trisuper Auditors has considered these issues and has helped accountants transition their clients to the new rules.
We welcome your call to discuss your specific client circumstances. As always, we aim to help.
If you would like help with any of these issues, please contact Joel Curry directly on
1300 TRISUP
or 02 4961 2788