From 1 July 2011, SMSF investments in collectables and personal-use assets have been subject to stricter rules than SMSF investments in other assets (such as shares and property).
Editor: Assets considered collectables and personal-use assets include things like artwork, jewellery, antiques, vehicles, boats and wine.
However, SMSFs that already had investments in such assets before 1 July 2011 were given five years to comply with these rules (i.e., until 30 June 2016).
Therefore, any SMSFs with such investments need to consider their situation carefully and take appropriate action (if necessary) before 1 July 2016.
Such action may include (for example):
- reviewing current leasing agreements (items can’t be leased to or used by a related party, including business premises);
- making decisions about storage (items can’t be stored or displayed in a private residence of a related party, and decisions about storage must be documented and the written record kept); and
- arranging insurance cover (items must be insured in the fund’s name).
In addition, if the trustees of the fund are considering disposing of these items, they can be transferred to a related party without a qualified independent valuation, but only if the transfer takes place before 1 July 2016 and the transaction is made on arm’s-length terms.
If these requirements are not met from 1 July 2016, penalties may apply.