With the deadline for new rules regarding collectible assets in SMSFs only 18 months away, the asset class is seeing a substantial decline, according to the SMSF Professionals' Association of Australia (SPAA).
Speaking to SMSF Adviser, SPAA director of technical and professional standards Graeme Colley said collectible and personal use assets have decreased from $776 million in December 2012 to $482 million in September last year.
“That’s a drop of $300 million,” said Mr Colley.
With the July 2016 deadline for the new rules around collectibles and personal assets growing closer, he expects there will be further divestment of the asset class.
Mr Colley believes the funds held in collectibles within SMSFs will decline a by a further $100–200 million in the next 18 months.
While the decline in collectibles could be the result of trustees deciding to sell due to market values, Mr Colley said the new requirements around valuations and insurance present barriers to maintaining an investment in the asset class.
Mr Colley said valuations remain an ongoing issue for collectible assets in SMSFs.
“The main reason is the volatility of some of these collectibles; I could give you a value today but I may not be confident in the valuation I give you, I may be substantially lower than what we perceive at the market value of the asset,” he said.
Mr Colley said cultural shifts can also result in considerable drops in value among some types of collectibles such as stamps.
“[SMSF trustees] not understanding the durability of some of these artworks can also be an issue as restoration can be expensive,” he said.
The new rule requiring SMSF trustees to insure a collectible asset within seven days of the fund acquiring it is also creating problems, according to Mr Colley.
“SMSF trustees have to work out who can value and insure a particular investment because they may not be able to find someone who is prepared to,” he said.
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