Personal Use and Collectables in SMSFs

Technical Articles

Contrary to popular belief, your SMSF can actually invest in collectables such as artworks, jewellery and wine as well as personal use assets such as boats, classic cars or other vehicles. However, investment in these assets must meet very strict and specific rules in order to qualify and thus care should be taken to avoid breaches of super rules in relation to owning collectables and personal use assets in SMSFs.

Collectables and personal use assets encompass a wide range of assets including: artworks; jewellery; antiques; artefacts; coins, medallions or bank notes in certain circumstances; postage stamps or first-day covers; rare folios, manuscripts or books; memorabilia; wine/spirits etc; motor vehicles and motorcycles; recreational boats; and memberships of sporting or social clubs.

The SMSF is allowed to invest in any of the above collectable or personal use assets provided such items are made for genuine retirement purposes and not to provide any present day benefit to either the members of the SMSF or related parties. In addition, the investment must also satisfy the following criteria:

  • comply with all other relevant investment restrictions including the sole purpose test;
  • the decision on where the item is stored must be documented and a written record kept;
  • the item(s) must be insured in the fund’s name within 7 days of the fund acquiring it;
  • where an item is subsequently transferred to a related party, it must be at the market value as determined by a qualified, independent valuer; and
  • the items must be unencumbered.

First and foremost, these rules mean that whatever collectable or personal use asset is purchased by the SMSF, they cannot be used by members or related parties in any capacity. To show how far this rule goes, the ATO cites an example of a classic car, if it is owned by the SMSF as an investment, it cannot be driven by a member or any related party for any reason. This holds true even if the only reason for driving the car is to maintain the car or to perform restoration work.

These rules also mean that any collectable or personal use asset owned by the SMSF cannot be stored on or in the private residence of any member or related party (this includes all parts of a private dwelling as well as the land on which the private residence is situated and all other buildings on that land such as garages or sheds). However, the asset can be stored, but not displayed in premises owned by a related party that is not their private residence.

The ability to obtain insurance must also be considered if your SMSF decides to invest in collectables or personal use assets. It is a requirement that the items are insured within 7 days, under either separate or one collective policy. The owner and beneficiary of the policy must be the SMSF itself. If the SMSF has already made the investment but is unable to obtain insurance, the ATO will need to be notified.

Category: Technical Articles