Adjunct Professor, Dr Brett Davies
Founder, Legal Consolidated
Art in SMSF is not a problem. However, every Self-Managed Super Fund, as part of its Investment Strategy and Product Disclosure Statement, must consider whether insurance on the fund's assets is desirable or prudent.
There is less than $500m of collectables held in SMSFs. This is a tiny proportion of the almost one trillion dollars value of all SMSF assets in Australia.
What are 'collectables'?
Section 62A Superannuation Industry (Supervision) Act 1993 allows regulations for collectibles (collectables) and personal use assets. Regulation 13.18AA (1) lists the collectibles and personal use assets in your SMSF:
- artwork (as defined in the Income Tax Assessment Act 1997). This includes : sculpture, drawing, engraving, photograph, reproductions, and property of a similar description or use
- coins, medallions or bank notes
- postage stamps or first day covers
- rare folios, manuscripts or books
- wine or spirits
- motor vehicles
- recreational boats
- memberships of sporting or social clubs.
Compulsory rules for Art in SMSF
However, for collectables and personal use assets, such as artwork, jewellery, antiques and coins, insurance is compulsory. You must take out insurance within 7 days of acquisition. Art in SMSF means insurance in the name of the Self-Managed Super Fund.
SMSFs and collectables
Self-managed superannuation funds with investments in collectables or personal-use assets that were acquired before 1 July 2011 were required to meet Superannuation Industry (Supervision) Regulations 1994 guidelines by 1 July 2016. The rules require that:
1. such items are not leased or used by a related party
2. such items are not stored or displayed in a private residence of a related party
3. decisions about storage are documented and the written record kept
4. such items are insured in the fund’s name within seven days of acquisition
Who must own the insurance policies?
The insurance policy must be in the name of your SMSF's Trustee. Therefore, you can't just add the insurance to another policy, not in the name of the SMSF Trustee.
Store art at the office?
You can store the collectables at your office. This is the case even though the business premises are leased or owned by a related party of the fund - such as a member or a member's company. Obviously, the art has to be 'stored' and NOT on display. This is because you can't 'enjoy' or benefit from your Superannuation until retirement. Your office insurance can't cover the art. This is because the insurance policy has to be in the Trustee's name - for the benefit of the SMSF. E.g. the policy should read: Goog Nominees Pty Ltd as trustee for the Goog Super Fund.
Sure you can lease your artwork to third parties - but the fund must still take out and own the insurance policy. You do not have to have a separate policy for each asset. You can have a ‘group’ policy to cover all the assets provided that they are clearly identifiable as fund assets – that is, separately insured from other assets of the trustees.
If you own coins and art they can be insured under the same policy (generally to save money) - but again - the owner of the insurance policy must be the Trustee ATF the SMSF Fund. Art in SMSF always requires insurance.
Your SMSF trustee records in writing the reasons for the decision on where to store the collectibles. You need a written policy guide for your art work on storage. Legal Consolidated Barristers & Solicitors is an Australia wide tax and superannuation law firm. We prepare your Policy which fully complies with your own Auditor and the ATO. Just telephone us for a quote.