From 1 July 2016, new rules for SMSFs holding or seeking to acquire collectible and other personal assets came into effect. From this date all collectibles and personal use assets held by a SMSF will have to comply with the new rules which state that the trustee of a SMSF must:
- not lease the collectible/personal asset to a related party;
- not store the collectible/personal asset at a private residence of any related party;
- document in writing the reason for storage of the collectible/personal asset and keep that written record for 10 years;
- insure the collectible/personal asset in the name of the SMSF within 7 days of acquisition ;
- ensure that the collectible/personal asset is not used/enjoyed by any related party of the SMSF; and
- ensure that if the collectible/personal asset is sold to a related party, that sale occurs at a market price, determined by a qualified independent valuer.
The following are considered to be collectibles and personal use assets in a SMSF:
- artwork (as defined by the Income Tax Assessment Act 1997 to include a painting, sculpture, drawing, engraving or photograph, or a reproduction of these items, or property of a similar description or use);
- coins, medallions or bank notes (gold bullion bars are not classified as a collectible or personal use asset);
- postage stamps or first day covers;
- rare folios; manuscripts or books;
- wine or spirits;
- motor vehicles;
- recreational boats;
- memberships of sporting or social clubs.
A related party of the fund includes the members of the SMSF, relatives of the SMSF members, and any partnerships, partners of partnerships (where a member is in partnership with them) and trusts and companies that a SMSF member controls.
Accordingly, a SMSF can continue to hold or acquire collectibles and other personal assets provided that the new rules are complied with.
Submitted by Minakshi Rohit