EY has warned that SMSF trustees will be shown no leniency when the new collectibles rules come into full force in July next year.
Speaking at the SMSF Adviser Technical Strategy Day in Melbourne last week, Matina Moffitt, executive director for financial services at EY, said SMSF trustees and practitioners should not expect a reprieve from the ATO if they do not follow the new collectibles rules by 1 July 2016.
Following the 2010 Cooper Review, the rules relating to ownership of collectibles in an SMSF have been tightened.
Under the new rules, there are a series of investment standards that need to be met by the SMSF holding the collectibles, including that the asset cannot be stored in a private residence of a related party. In addition, there must be a documented decision about asset storage.
Most significantly, the collectible must be insured in the fund’s name within seven days of the SMSF acquiring it.
Ms Moffit said that given SMSF trustees have effectively had five years to make alternative arrangements, the regulator will expect them to be compliant on deadline.
Similarly, the SMSF Association’s Graeme Colley told SMSF Adviser that considering the recommendation from the Cooper Review was to do away with SMSFs' investing in collectibles and artworks, it would be reasonable to expect that there will be no extension to the transitional period for those artworks and collectibles held by funds as at 30 June 2011.
“While this may create some issues for some artworks and collectibles in relation to insurance and storage, trustees have had many years to make adjustments to the fund investments,” Mr Colley said.
Mr Colley further noted that the holdings of artworks and collectibles by SMSFs have decreased from a peak of $731 million in March 2012 to the June 2015 level of $389 million.
“It could be expected that this will decrease further as trustees decide whether to retain or dispose of some or all of their holdings of artwork or collectibles,” he said.
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