On 1 July 2011, new regulations stipulating the way trustees of a self-managed superannuation fund (SMSF) hold and use collectibles and personal-use assets took effect. A five-year period of transition, giving trustees time to ensure existing assets are compliant, will expire on 30 June 2016.
That means all collectables and personal-use assets held by an SMSF need to be compliant with these rules from 1 July 2016.
The purpose of the regulations
There are two key purposes of the collectables and personal-use assets regulations. They seek to:
- Prevent SMSF trustees from gaining current-day benefit from a personal-use asset
- Ensure any personal-use asset is held solely for genuine retirement income purposes.
Which assets do the changes apply to?
The personal items and collectables that need to comply with these regulations include:
- Coins and medallions
- Postage stamps
- Rare folios, manuscripts and books
- Motor vehicles
- Recreational water vehicles including boats
- Sporting and social club memberships.
How will the changes affect me?
SMSF trustees holding a collectible or personal-use asset in their SMSF must ensure an asset:
- Is not leased to a related party
- Is not used by a related party
- If it is to be sold to a related party, it must be sold at market price, as determined by an independent valuer
- Is not stored in the private residence of a related party—what’s more, decisions relating to the storage of an item must be documented and retained for at least ten years.
- Is insured in the fund’s name.
What if my assets fail to comply?
Since 1 July 2014, the Australian Tax Office (ATO) has had the ability to impose financial penalties directly on individual trustees—and the trustee cannot pay for these fines using SMSF assets. Fines can range from hundreds of dollars to more than $10,000, so it pays to be compliant.
Get some help
There’s a lot to consider when managing your own super fund and ensuring it meets the regulations. The good news is you don’t have to do it all by yourself. Find out more about managing an SMSF and speak with a financial adviser. We’re here to help.