With the new rules for collectable assets now in place, an SMSF auditor has cautioned SMSF practitioners on where unexpected compliance issues may arise with the insurance requirements for these assets.
Veritas Corp director Sharlene Anderson urged delegates at the CPA SMSF National Conference to closely monitor compliance with the insurance requirements for collectable assets, with the new rules for collectable assets now applying to those assets that were previously grandfathered.
Ms Anderson referred to a situation where a trustee had artworks that were insured by a policy held by a company leasing artworks.
“So it wasn’t the super fund that had the insurance, it was the people leasing the artwork that had taken out the insurance policy,” she said.
“So the artwork [was] insured, but under regulation it has to be insured in the name of the super fund, [so it wasn’t] going to pass. The party that was leasing it had insured it, and had nominated the leasing agent as the beneficial party. The owner of the artwork, the super fund, was not mentioned anywhere in the policy.”
Ms Anderson said the regulator’s response was simple, stating that because the policy was not in the super fund’s name and was not a beneficiary or even listed as an interested party, it was a compliance problem.
“The response was to take out another insurance policy for the artwork, so basically double insure the artwork,” she said.
Ms Anderson reminded SMSF auditors that these types of compliance issues are reportable and there is a statutory time limit for reporting them.
“If you go back to say a 2015 audit and it’s got artwork in it, and it’s not insured, the time limit for the fund having the artwork insured, was the 14 July 2016. So even though you might be doing a 2015 audit, if it’s not insured, you’re going to have a breach now in the 2015 year,” she said.
The reporting criteria has to be lodged within the statutory time limit, once the fund has failed to comply with requirements for more than 14 days.
“So if more than 21 days has passed since the fund acquired the artwork and it’s not insured by the fund, you need to lodge a contravention report, regardless of the materiality,” Ms Anderson said.
While few funds tend to hold collectable assets, this is one reason to keep a closer eye on these assets.
“There’s not a lot of them, so you’re probably not dealing with these assets all the time,
“Keep your eye out for that one if you do have anyone with artwork. You probably don’t have a lot of funds with artwork, but because you don’t have a lot of them, you’re not doing them all the time, so it’s something to watch out for and be aware of.”
SUBSCRIBE TO THE SMSF ADVISER BULLETIN
- 17 Aug 2017Industry questions ATO’s capacity for new reportingBy Miranda Brownlee
- 17 Aug 2017Qld succession law changes tipped to impact SMSFsBy Miranda Brownlee
- 16 Aug 2017Contribution limits restricting future balances, warns mid-tierBy Staff Reporter
- 16 Aug 2017SMSF firms underprepared for events-based reportingBy Miranda Brownlee
- 15 Aug 2017SMSF auditor disqualified for misconductBy Staff Reporter
- 15 Aug 2017Class gains market share in financial year resultsBy Staff Reporter
- view all
- Industry questions ATO’s capacity for new reporting
With events-based reporting set to generate huge amounts of data, concerns have been raised about whether the ATO’s systems will be able t...read more
- Contribution limits restricting future balances, warns mid-tier
Clients hoping to accumulate a superannuation balance of $1.6 million by age 65 will need to start taking full advantage of concessional con...read more
- SMSF firms underprepared for events-based reporting
A straw poll has revealed that the majority of SMSF firms currently feel their firm is not equipped to deal with the proposed events-based r...read more
- view all