Acquiring collectibles inside your SMSF
Clients with SMSFs often ask what assets the SMSF can acquire. The golden rule is the sole purpose test — the fund must be maintained to provide retirement benefits to members.
Clients with self managed superannuation funds (SMSF) often ask what assets the SMSF can acquire.
Why?
The golden rule for acquiring assets inside your SMSF is why? To be compliant, your fund must be maintained for the sole purpose of providing retirement benefits to members, or to their dependants if a member dies before retirement. The sole purpose test (section 62 of the Superannuation Industry (Supervision) Act 1993) is your starting point.
The sole purpose test extends to how the collectible is managed once acquired. Given the asset is for the sole purpose of the member's retirement benefits, the members (or their associates) cannot use or enjoy the asset in any way. This means:
- Storage of the collectible cannot be at the trustee's residence or displayed at their office.
- Leasing or use of the collectible can only be undertaken with an unrelated party.
- The collectible must have its own insurance policy owned by the SMSF within 7 days of acquisition.
- If a collectible is sold to a related party, it must be sold at market value with a qualified independent valuation.
Your investment strategy
An SMSF investment strategy should articulate the plan trustees have for a fund and the investments they choose to hold. If your SMSF is considering purchasing collectibles, it is essential that your investment strategy is aligned to these types of investments.
- Sole purpose test is the starting point for any SMSF asset acquisition
- Collectibles cannot be stored at trustee's residence or displayed at their office
- Insurance must be in place within 7 days of acquisition
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