One of the main attractions of an SMSF is the flexibility to invest in a range of assets not traditionally available to invest in via another superannuation vehicle. Artwork and collectables are an obvious one. But before you go purchasing artwork via your SMSF to adorn the walls of your home or business, there are several rules that must be followed should this be your investment of choice.
The sole purpose test governs all activities of an SMSF. That is, the fund must be maintained for the sole purpose of providing retirement benefits to its members, or their dependents if the member dies before retirement. This also means that no personal benefit must be gained from the super fund and its assets.
Investing in artworks or collectibles needs to be included and considered in the super fund’s investment strategy. Traditionally the asset class is relatively illiquid, and the trustees need to ensure there is adequate liquidity in the fund to meet expenses and any member benefit liabilities.
Specific rules relating to artwork and collectables include:
- Can’t be leased to a related party, used by a related party or stored or displayed in a private residence of a related party. A related party includes the fund’s members, their relatives and any entities such as partnerships, companies or trusts that they control.
- Must be individually insured within seven days of purchase in the name of the SMSF.
- If the asset is purchased from the fund by a related party – must be done so at market value as determined by a qualified independent valuer.
- Can be stored in business premises of a related party but NOT on display.
- Written document as to why the asset is stored at the location chosen and the document must be kept on file for 10 years.
Penalties for contravention of any of the rules is 10 penalty units for each SMSF trustee. 10 penalty units is currently $2,100.
The content above has been prepared by H&R Block Ltd (“H&R Block”), ABN 89064268 800.The above information is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice. Although every effort has been made to verify the accuracy of the information contained above, H&R Block, its officers, employees and agents disclaim all liability (except for any liability which by law cannot be excluded), for any error, inaccuracy in, or omission from the information contained on this website or any loss or damage suffered by any person directly or indirectly through relying on this information.
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