Collectables and personal use assets are things like:
- artworks
- jewellery
- vehicles
- boats
- wine.
Investments in such items must be made for genuine retirement purposes, not to provide any present-day benefit.
Collectables and personal use assets can't be:
- leased to, or part of a lease arrangement with, a related party
- used by a related party
- stored or displayed in a private residence of a related party.
In addition:
- your investment must comply with all other relevant investment restrictions, including the sole purpose test
- the decision on where the item is stored must be documented (for example, in the minutes of a meeting of trustees) and the written record kept
- the item must be insured in the fund's name within seven days of the fund acquiring it
- if the item is transferred to a related party, this must be at market price as determined by a qualified, independent valuer
- as with all fund assets, check prior to purchase that they are not encumbered in any way (you can use the Australian Financial Security Authority's Personal Properties Security Register to ensure that collectables and personal use assets have no security interests over them prior to your purchase).
For collectables and personal use assets you held before 1 July 2011 you had until 30 June 2016 to comply with these rules.
Definition of collectables and personal use assets
Collectables and personal use assets are:
- artwork – including
- paintings
- sculptures
- drawings
- engravings
- photographs
- jewellery
- antiques
- artefacts
- coins, medallions or bank notes
- coins and banknotes are collectables if their value exceeds their face value
- bullion coins are collectables if their value exceeds their face value and they are traded at a price above the spot price of their metal content
- postage stamps or first-day covers
- rare folios, manuscripts or books
- memorabilia
- wine or spirits
- motor vehicles and motorcycles
- recreational boats
- memberships of sporting or social clubs.
Definition of private residence
A private residence includes all parts of a private dwelling (above or below ground), the land on which the private residence is situated and all other buildings on that land, such as garages or sheds.
Usage
Collectables and personal use assets can't provide a present-day benefit, so they can't be used by members or related parties.
For example, if your SMSF owns a vintage car, related parties can't drive it for any reason – not even for maintenance purposes or to have restoration work done – because this constitutes use of the asset.
Display or storage
Collectables and personal use assets must not be stored in the private residence of any related party. If they were acquired before 1 July 2011 you had until 1 July 2016 to meet this requirement.
You can store (but not display) collectables and personal use assets in premises owned by a related party, provided it is not their private residence. They can't be displayed because this means they are being used by the related party.
For example, if your SMSF invests in artwork, it can't be hung in the business premises of a related party where it is visible to clients and employees.
Remember to keep a record of the reasons for deciding where to store the assets.
Insurance
Collectables and personal use assets owned by the fund must be insured in the name of the fund within seven days of acquiring them.
The assets may be insured under separate policies or collectively under the one policy, but the fund must be the owner and beneficiary of the policy. It is not sufficient for:
- the trustee or member to include the assets in their own policy (for example, as part of a home and contents insurance policy)
- a third party to own the policy (for example, a business owner or custodian who is storing, displaying or leasing the asset)
- the fund to be noted on a policy owned by a third party as a named insured or beneficiary.
It is important that the fund owns the insurance policy so that:
- the fund’s assets are adequately protected against financial loss or liability
- you have control over negotiating the terms of the policy and other important aspects such as arbitration in the event of a dispute
- you can make a claim under the policy, and any insurance proceeds are payable directly to the fund.
Having the fund as the owner of the policy also helps to provide evidence of ownership of fund assets.
If you acquired a collectable or personal use asset prior to 1 July 2011, you must have insured it in the name of the fund prior to 1 July 2016 to comply with the rules.
You should consider the availability and cost of insurance as part of your decision to invest in collectables and personal use assets. If your fund has made the investment and you can't obtain insurance we encourage you to use our SMSF early engagement and voluntary disclosure service to notify us.
Leasing
You can only lease collectables and personal use assets to an unrelated party and the lease must be on arm's length terms.
For example, your SMSF can lease artwork to an art gallery provided the gallery is not owned by a related party and the lease is on arm's length terms.
Selling
Collectables and personal use assets can be sold to a related party provided the sale is at market price as determined by a qualified, independent valuer.
- A valuer is qualified either through holding formal valuation qualifications or by being considered to have specific knowledge, experience and judgment by their particular professional community.
- A valuer is independent if they are independent of the interests of the fund. This means the valuer should not be a member of the fund or a related party of the fund (for example, an investment partner).
If your fund acquired the collectable or personal use asset before 1 July 2011 and sold it before 1 July 2016, the transaction does not need to be supported by a valuation determined by a qualified independent valuer. However, the transaction must still have taken place on arm's length terms.
See also:
- Valuation guidelines for self-managed super funds
- Personal Property Securities RegisterExternal Link – search to find out if the collectable is subject to a security interest that may see it repossessed
- Related parties and relatives
- SMSF early engagement and voluntary disclosure service