The Australian Taxation Office (ATO) has issued a number of statements setting out its expectations for how a self-managed superannuation fund (SMSF) that holds collectables and personal use assets should store, insure and determine the market value of an asset at year-end.
Collectable and personal use assets include (but are not limited to):
- Coins and medallions (where their value exceeds their face value)
- Postage stamps
- Wine or spirits
- Motor vehicles, motorcycles and recreational boats
- Membership of sporting or social clubs.
We’ve summarised the ATO’s requirements for you below, with respect to the display and storage of collectables and personal use assets. If your fund owns a collectable or personal use asset, we recommend you obtain advice specific to the fund’s circumstances to ensure your SMSF operates in line with the ATO’s expectations.
Collectable and personal use assets must not provide any present day benefit. This means the asset can’t be used by the fund’s members or any related party.
In the ATO’s example, if the fund owns a collectable or vintage car, members of the fund and any related parties are prohibited from driving the vehicle for any reason, not even for maintenance purposes or to have restoration work carried out.
Display or storage
Collectable and personal use assets must not be stored in the private residence of fund members, or their related parties.
Collectable and personal use assets can be stored at the premises of a related party, provided it is not their private residence. Despite this, the assets must not be displayed by the related party because the ATO views this as use by the related party.
In the ATO’s example, if the fund owns artwork it can’t be hung in the business premises of a related party where it is visible to the fund members, clients or employees.
The fund’s trustee must document the reasons for deciding where to store the assets.
Collectable and personal use assets must be adequately insured by the fund within seven days of the fund acquiring the asset.
The insurance premium must be paid by the fund. Additionally, the insurance policy must clearly demonstrate the policy is owned by the trustee on behalf of the fund, with the policy owners full and correct name recorded on the policy document, e.g. Smith SMSF Pty Ltd as Trustee for Smith Family Superannuation Fund.
The insurance cannot be part of a trustee’s home and contents insurance or grouped with other insurance policies of entities other than the fund itself.
The fund can only lease collectable and personal use assets to unrelated parties and the lease must be on commercial and arm’s length terms.
In the ATO’s example, a fund can lease artwork to an art gallery, provided the gallery is not owned by a related party.
Collectable and personal use assets can be sold to a related party of the fund, provided the disposal is at market price as determined by a qualified independent valuer.
A valuer is qualified either through holding formal qualifications or be being considered to have adequate knowledge, experience and judgement by their professional peers.
A valuer is independent if they are independent of the fund’s interests, i.e. the valuer must not be a member nor a related party of the fund.
What you should do
If your fund holds collectable and personal use assets, which we believe will come under increasing scrutiny from the ATO, we recommend you ensure the above requirements are in place for your fund by 30 June 2021.
If you have any questions regarding these changes, please contact your local Superannuation adviser.