Collectables as an SMSF Investment
Collectables are an acceptable investment for self-managed superannuation funds but with certain limitations.
What are collectables?
- Coins, medallions and bank notes
- Postage stamps
- Rare folios, manuscripts, books
- Wine or spirits
- Motor vehicles
- Recreational boats
- Memberships of sporting clubs
Before investing in collectables it must be allowed for in the self-managed super fund’s investment strategy.
Sole Purpose Test
Self-managed superannuation funds are allowed various tax concessions, provided they meet the “Sole Purpose Test” which requires that the fund’s sole purpose is to provide retirement benefits for its members.
If members of a self-managed super fund were obtaining “personal benefit” from admiring the artwork, driving the collectable car, drinking the wine, and so on, their fund would fail the Sole Purpose Test. The consequences of failure are severe.
Regulations With Effect 1 July 2011
Trustees of self-managed super funds need to be aware of their obligations if they invest in collectables. The Regulations prohibit any of the following:
- Leasing a collectable item to any party related to the self-managed super fund.
- Storing a collectable at the private residence of any party related to the self-managed super fund.
- Failing to keep written records of decisions made in respect to storage of collectables.
- Failing to insure the collectables in the name of the self-managed super fund.
- Allowing a party related to the self-managed super fund to use a collectable item owned by the fund.
- Selling a collectable item to a related party of the self-managed super fund other than at a price determined by a qualified independent valuer.
These Regulations applied from 1 July 2011 and transitional arrangements applied to existing collectable investments.
Self-managed superannuation is an area of core expertise at DBA Accountants. We assist with the “should we or shouldn’t we?” question. We carry out self-managed super fund establishment, administration and on-going guidance. We do not advise on specific investments within self-managed super.