Continuing with collectables

In his 2010 recommendations to the federal government, Jeremy Cooper suggested banning self-managed super funds (SMSFs) from investing in collectables and personal use assets. Fortunately, the government didn’t take up this recommendation, but felt it wise to put some parameters around how SMSFs could continue with such investments.

Following consultation, the government has now released an exposure draft detailing what those parameters will be. From 1 July this year, it is proposed that assets that are categorised as collectables and personal use assets cannot be leased to related parties, cannot be stored in private residences of related parties and certain items cannot be used by related parties (though interestingly, wine wasn’t one of them!) Other measures include trustees documenting decisions, holding insurance in the name of the fund and valuations on transfers to related parties.

In the past, unforeseen outcomes have resulted following changes in legislation (such as the excess contributions tax) so I’m keen to know if anyone can anticipate any problems in the implementation of these draft regulations. One person advised that, in his case, the insurance is already undertaken, albeit by another party, and questioned the need for additional insurance in the fund’s name (in a gallery holding artwork for his SMSF which already had insurance over the asset). Are there any other examples you are aware of? Now is a good time to raise any concerns, before the regulations are finalised!

What are your thoughts? Feel free to comment below or email me at superannuation@charteredaccountants.com.au