Collectibles inside Self Managed Superannuation Funds
For some time now, there has been debate about the merits of self managed superannuation fund (“SMSF”) holding collectibles and personal use assets as part of their investable assets. Whether it is artwork, stamps, rare coins, antiques, jewellery, and even rare wine or classic cars, such collectables and personal use assets have been and/or are held by some SMSF.
There are investors who see collectables being a valid asset class for a SMSF to invest in, on the basis of the potential capital growth generated by such assets over time and diversification away from other more traditional types of investments.
On the other hand, there has been concerns by some (such as the Australian Taxation Office) that such collectables have been acquired for other purposes, such as allowing the members to get the use of superannuation monies on assets for more personal enjoyment, and not for the “sole purpose” of providing superannuation benefits on their retirement.
The Federal Government established a review into the governance, efficiency, structure and operation of Australia’s superannuation system. This Super System review was chaired by Jeremy Cooper and is generally known as the “Cooper Review”. In the final report of the Cooper Review, it recommended collectables and personal use assets should be prohibited as an investable asset class inside SMSF, and for any existing SMSF with such investments, be given five years to dispose of those investments.
In July 2010, the Federal Government issued a press release confirming it would continue to allow SMSF to hold collectables and personal use assets as investments, but that there would be changes to the law and regulations in how these investments were able to be held.
On 1 February 2011, the Assistant Federal Treasurer introduced amending legislation as a first step towards restricting how collectables and personal use assets would be required to be held. Further regulation will be issued (after consultation) in due course to set out the details of how such collectables are to be held.
It is likely (whilst we wait for the detail) that such collectables and personal use assets will no longer be able to be held at the member’s home and/or business premises, but rather be required to be held in some other form of secure holding, such as non related art galleries, vaults, professional storage facilities etc. These regulations and changes to how such investments are to be held will also indicate the time frame to which such actions need to be taken to change the holdings. We will have to wait for this detail to issue in due course.
Tags: collectibles, SMSF