Collectable or bullion?

The are quite different compliance requirements depending on whether gold is considered a collectable or bullion.

Collectables and personal use assets, regarding gold, tend to be things like jewellery and commemorative gold coins, where the value of the investment is worth more than its intrinsic value. This contrasts with bullion, where the face value and intrinsic value of the asset are almost the same.

I say almost the same because gold bars and bullion tend to trade at a slight premium to the spot price of gold, due to the refining, manufacturing, supply chain, and distribution costs. But the spot price and the price charged by dealers are close and the larger the unit size the smaller the premium (i.e. a 1-kilogram bar carries a lower percentage premium than a 1-gram bar) and are lower for gold than for silver.

Examples

A Gold Cast Bar sold by the Perth Mint with 99.99% purity would be considered bullion, as the price of the gold bar is very close to the spot price of gold and the Gold Cast Bar has no discernible features, other than the Perth Mint, serial number and purity stamp. If bullion bars or coins derive their value in the marketplace as a tradable form of precious metal, they will not be considered a collectable asset.

In contrast, an Australian Lunar Series III 2026 Year of the Horse Gold Proof Coin sells at a significant premium to the spot price of gold and has intricate engraving, a limited production run and comes in a commemorative case. It is likely such a gold coin would be considerable a collectable rather than bullion.

Why does it matter?

It matters because bullion has less onerous rules than collectables. If gold is considered bullion, the value is based on the market value readily found. Also, storage can be at a related party’s premises (such as in a home safe) and the asset can be insured, but it is important to check with the insurance provider about the specific coverage options available for precious metals. Many homeowners' insurance policies may offer limited coverage, so the SMSF trustee might consider a standalone insurance policy for better protection. However, the premium may be expensive.

Also, if the value of the gold is a significant portion of the SMSF, the fund auditor may recommend a separate policy of insurance. If the bullion is stored with a specialist third party facility, the insurance cover is usually provided by that entity.

Collectables, on the other hand, cannot be stored in a related party’s residence, not even temporarily, the collectable gold item/s would need to be insured in the fund trustee’s name within seven days of acquisition and the fund member/s technically could not use the asset at all, even if leased to a third party on an arm’s length basis.

Conclusion

Holding physical gold in an SMSF can seem like an attractive proposition, especially in volatile economic and political times. The flight to safety in such circumstances is hard to ignore. However, physical gold held in an SMSF has many nuances, and trustees need to understand the rules and risks that go with investing in such assets. Not all that glitters is gold.