Collectables in your SMSF

Your SMSF can invest in collectables and personal use assets, things like artwork, wine, classic cars, jewellery and memorabilia. But these assets come with some of the strictest rules in super, because they are so easy to enjoy personally. This article explains the rules so your fund can hold them without breaching them.

What counts as a collectable

The rules cover a wide range of items, including artwork, jewellery, antiques, coins and medallions, stamps, rare books and manuscripts, wine and spirits, motor vehicles, recreational boats, and memorabilia. If your fund holds something in this category, the special rules apply.

You and your family cannot use or enjoy them

This is the heart of the rules and the reason they exist. The whole point of super is to provide for retirement, not to let you enjoy assets now. So with collectables:

No one connected to the fund can use the asset. You cannot drive the classic car the fund owns, drink the wine, or wear the jewellery.

The asset cannot be stored or displayed in the home of anyone connected to the fund. The painting the fund owns cannot hang on your wall, even in a home office.

If you ever sell the asset to someone connected to the fund, it has to be at a proper market value worked out by a qualified independent valuer.

The common thread is that these are investments locked away for retirement, not things for you to enjoy along the way.

You must insure them quickly and in the fund’s name

The fund must insure the asset, in the name of the fund, within seven days of buying it. This is a specific and strict requirement, and missing it is a breach that cannot be undone after the fact. The insurance has to be in the fund’s name, not your personal name.

You must record where it is stored

The trustees have to make a decision about where the asset is stored, keep a written record of that decision, and keep the record. The storage cannot be in a connected person’s home, so collectables are often kept in independent storage facilities or specialist premises.

You must be able to prove it exists and what it is worth

Like any fund asset, a collectable must be shown at its market value at the end of each financial year. For valuable items, your auditor will want an independent valuation, supported by evidence of the item’s condition. You also need to be able to show the asset actually exists, for example through inspection or photographs.

Why the rules are so strict

Collectables are unusually easy to enjoy personally, which is exactly what super is not for. That is why the rules go further than for most assets, spelling out that they cannot be used, cannot be stored at home, must be insured immediately and must be sold to connected parties only at an independent valuation. Several of these breaches cannot be fixed after they happen, so getting it right from the start matters.

The bottom line

Your fund can hold collectables like art, wine and classic cars, but no one connected to the fund can use them or store them at home, they must be insured in the fund’s name within seven days, the storage decision must be recorded, and they must be valued and able to be shown to exist each year. These rules are strict and some breaches cannot be undone, so follow them carefully from day one.

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This article is general information for trustees and members. It is not financial, legal or tax advice about your particular situation. Consider getting advice from a licensed professional before making decisions about your fund.