Many of my clients (in particular medical professionals) are keen art collectors. Until a few years ago, self managed super funds were the investment vehicle of choice to invest in art.
However, with the July 2016 deadline looming, many SMSF investors have started to dispose of their art and collectibles.
The new rules apply to all new SMSF investments purchased on or after 1 July 2011. Collectibles and personal use assets held by a self managed super fund as at 30 June 2011 have not had to comply with the new rules but they will need to comply by 30 June 2016, following a five-year transition period.
Changes In summary, some of the main changes include the following:
• NOT LEASED TO A RELATED PARTY. Collectibles and personal use assets must NOT be leased to any related party of the SMSF.
• NOT STORED IN PRIVATE RESIDENCE. Collectible and personal use assets must NOT be stored or displayed in the private residence of any related party of the SMSF (although it can be stored, but not displayed, in business premises).
• REASONS FOR STORAGE IN WRITING. SMSF trustees must record in writing the reasons for the decision on where to store the collectible, and keep that record for 10 years.
• MAINTAIN INSURANCE. SMSF trustees must ensure the asset is insured in the name of the fund within 7 days of acquisition.
• VALUATION BY QUALIFIED INDEPENDENT VALUER. Transfer of ownership of collectables and PUAs to a related party of a SMSF must be done at a market price determined by a qualified independent valuer.
Holding costs will increase as a result of these changes, reducing the appeal of owning artwork through super.
Which assets? The main types of assets that fall under these rules are:
• artwork (a painting, sculpture, drawing, engraving or photograph); • jewellery; • antiques; • artefacts; • coins, medallions or bank notes; • postage stamps or first day covers.
What should you do?
If you own art or other collectibles in your self managed fund, then you should at least consider your position in light of the looming changes. Regardless of whether you can comply with the new legislation, it may be wise to review the investment potential of your artwork. As already highlighted, many SMSF investors have already started to dispose of their collectibles and the market has suffered since the changes were announced a few years ago.
Are you confident art (still) makes sense as an investment or should you consider it purely as a lifestyle asset?
If you are looking to dispose of your artwork from your super fund, you can either sell it or vest it out as a benefit payment (depending on your age). You should seek financial advice to consider your personal options.
If you would like to establish a diversified investment strategy for your self managed super fund or get a second opinion on your current portfolio, please contact me on 08 9381 2704 to book an appointment.
Disclaimer: Yves Schoof and Affluence Private Wealth are Authorised Representatives of Synchron, AFS Licence No. 243313. The information posted is intended to be general in nature and is not personal financial product advice. It does not take into account your objectives, financial situation or needs. Before acting on any information, you should consider the appropriateness of the information provided and the nature of the relevant financial product having regard to your objectives, financial situation and needs. In particular, you should seek independent financial advice and read the relevant product disclosure statement (PDS) or other offer document prior to making a decision.