We often are asked; can I invest in collectables in my Self Managed Superannuation Fund (SMSF) and how does it work? Here are some common questions and answers.
What is a Collectable?
Collectables are also known as:
- Artwork (paintings, sculptures, drawings, engravings, photographs);
- Coins, medallions or banknotes;
- Postage stamps or first-day covers;
- Rare folios, manuscripts or books;
- Wine or spirits;
- Cars and motorcycles;
- Recreational boats;
- Membership of sporting or social clubs.
Note, coins, and banknotes are collectables when their value exceeds their face value.
Bullion coins are collectables when their value exceeds their face value and trades at a price above the spot price of their metal.
Can I purchase collectables in an SMSF?
Yes, however, there are strict rules to follow to ensure the SMSF is following the superannuation rules.
What documentation do I need?
Purchase documentation to confirm collectables are in the name of the SMSF.
Keep a record for the reasons in deciding where to store the assets.
Obtain an insurance policy in the name of the SMSF within 7 days of purchase.
Prepare lease agreements with commercial terms.
Obtain valuations for collectables as evidence of complying with superannuation laws in the event of a purchase, sale, change of circumstance and at the end of the financial year.
Can I use collectables for personal use?
The short answer is no.
A member or related party of the SMSF collectable cannot use the collectable for any reason; i.e. cannot drive a vintage car held in the SMSF.
An unrelated party can lease collectables where the lease is on commercial terms, i.e. SMSF can lease artwork to an art gallery.
Where can I store the collectables?
Members nor a related party of the SMSF cannot store collectables in their private residence.
They can be stored but not displayed in premises owned by a related party, provided it is not their private residence.
Document the decision as to where the collectable is to be stored and keep it for at least 10 years.
Can I sell collectables in my SMSF?
Yes, and collectable can be sold to a member or related party of the SMSF at market value. An independent and qualified valuer determines the market value.
What else do I need to know?
Always keep in mind the sole purpose of the SMSF. That is, to provide retirement benefits to the members, or their dependants if a member dies before retirement.
If you would like more information about the rules surrounding collectables in an SMSF do not hesitate to contact us on 03 9838 3055.
September 2020 ~ Kerrie Salvatore, Concise Super
© Concise Super 2020