By SARAH BLAKE
MANAGER, BUSINESS ADVISORY
Sarah.Blake@williambuck.com

changing life text

Legislation impacting the conditions under which SMSFs can hold collectables as investments, comes into full effect from 1 July 2016.

Collectables held by an SMSF must be stored and insured in accordance with the legislation which has been five years in the making.  Given the extended timeframe trustees had to make alternative arrangements, it expected that the ATO will not grant any leniency to trustees who have not complied with the new rules by the deadline.

The new rules for collectables are as follows:

  • The item must not be leased to a related party of the Fund
  • The item must not be stored in the private residence of a related party of the Fund
  • A written record of the reasons for the storage decision must be made by trustees and kept for at least ten years
  • The item must be insured in the name of the Fund within seven days of acquiring the item
  • A related party of the Fund must not use the item
  • If the collectable is sold or transferred to a related party, the realisation must be at market price determined by a qualified independent valuer.

Collectables which will not be stored and insured in accordance with the new rules should be disposed by 30 June 2016 to avoid incurring ATO penalties of up to $1,800 per breach.