Silver lining for an SMSF owning bullion

“It means that they don’t come under those restrictive storage requirements and usage requirements [of collectibles] but bullion is like any other asset in the self-managed superannuation fund and it needs to be stored securely and have insurance.

“If you’ve got a $50,000 gold bar, you might be able to store it at your house, but you would want to make sure that your $50,000 gold bar was very securely stored.

“Do you have a fireproof safe that is also break-in proof? And if the fund is going to purchase gold and bullion, then you’re going to need to make sure that the investment strategy allows for it, and you’re going to have to consider things like insurance.”

Collectibles can include anything from jewellery to a car, or even a boat, as well commemorative coins which do not fall under the category of bullion or gold, said Mr Ali.

And although collectibles cover a wide range of asset classes, Mr Ali said SMSFs generally don’t hold a large portion of collectibles.

“Only about $350 million if the $800 billion SMSF sector is in collectible assets, which is only about 0.5 per cent of all SMSF assets,” he said.

He said bullion is different to traditional collectibles and tends to be held in places like the Perth Mint.

“When it comes to things like gold and silver, it’s more of those commemorative coins or specialty coins that tend to be collectibles – gold and silver collectibles versus golden or silver bullion,” he said.

In regard to other collectibles, Mr Ali said there are strict regulations on how these can be held by an SMSF especially when it comes to storage and valuation.

“It’s important to remember the sole purpose of superannuation is for retirement savings. So collectibles need to be seen as an asset that the fund is going to use to grow substantially so that the members can have bigger retirement benefits,” he said.

“We always need to remember that there’s that retirement nexus with why a fund holds a particular asset. It can’t be an asset that can be enjoyed on a regular basis by members.

“That extends not just to things like artwork, but also cars. You can’t store a classic car in your garage or that of a related party. It would need to be stored somewhere else, perhaps displayed at a dealership.

“It’s the same with any other collectible – they can’t be used or displayed or enjoyed by the member of the fund. The sole purpose of owning that asset is for the return on benefits of members, so there really can be no present-day enjoyment.”

Collectibles also have to be insured in the name of the trustee of the superannuation fund and cannot form part of a home and contents insurance.

“And usually you need to revalue assets, whenever there’s material change in the self-managed superannuation fund,” he said.

“For example, we just had an artist pass away not long ago, John Olsen. That might mean that if the fund held a particular piece of artwork by John Olsen after his passing, artwork tends to increase in value, so that might be the impetus to get the asset revalued.”

Collectibles can be sold to a member of the fund but it needs to be sold at market value.

“There’s particular documentation that the fund needs to hold when it comes to collectibles.” Mr Ali said.

“One of those is proof of ownership, whether that be something like a certificate of ownership or title of ownership or something that proves that the item is owned by the self-managed superannuation fund.

“An accountant or auditor would also want to see something like the investment strategy of the fund owning that asset, because again, we’ve got that link between the assets of the fund and retirement benefits of the member(s).

“We would also want to see information on where it’s displayed, how it’s displayed, or stored and we would want to see those certificates of insurance to make sure that it’s in the right name.”