What assets are defined as collectables in an SMSF?
Collectables and personal use assets are broadly defined as anything that would normally be purchased for personal enjoyment even if they were purchased to enhance the members’ retirement savings.
While all super funds are required to invest solely for the purpose of saving for retirement or protecting beneficiaries on a member’s death, this doesn’t mean they can’t invest in assets that might normally be bought for personal enjoyment.
Some funds have substantial art collections, hold rare coins or even vintage cars. Because people normally buy these to enjoy them, they are classified as collectables.
Similarly, gold coins and jewellery are generally classified as collectables for SMSFs but gold bullion products are not. The reason is that people don’t usually buy gold bullion for fun, they buy it as an investment.
Most investments in collectables trigger extra rules for SMSFs. It’s worth noting that these rules don’t apply to all collectables, just those on a specific list in the super regulations (regulation 13.18AA). Examples include artwork, jewellery, antiques and coins.
Special rules for SMSFs investing in collectables
For SMSFs that hold assets classified as “collectables” under the regulations are subject to special rules, additional documentation and insurance requirements .
These collectable investments can't be:
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leased to a related party;
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stored at the residence of a related party; or
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used by a related party generally a person.
For example, if a person or business buys artwork through their SMSF, they can't hang it in their office where staff or clients can see it. Doing so would suggest the artwork was bought for personal pleasure rather than purely as a retirement investment – which isn't allowed.
The fund can, however, rent the artwork to an art gallery, as long as the gallery isn't owned by someone connected to the fund and the rental agreement is a fair, commercial deal. Even if the gallery has its own insurance, the artwork must be insured under the SMSF's name. A rental arrangement doesn't have to be a formal written contract – any situation where someone is using or controlling the artwork counts, even if no rent is actually being paid. (And of course not receiving rent in circumstances where rent would normally be expected would create other problems – is the arrangement really on an arm’s length basis?).
And there are other rules:
| Insurance | Documentation | Transfer |
| Collectables held by SMSFs must be insured within 7 days of being bought by the fund and the policy must be in the fund’s own name. | Decisions about where the asset is stored and why must be documented by the trustee and the record needs to be kept for 10 years. | A collectable can only be sold or transferred to a related party if it’s done on commercial terms and if the asset is first valued by an independent and qualified valuer. |
What about assets that aren't on the list?
Assets that would ordinarily be considered "personal use" in nature but don't appear in that list are not subject to the collectable rules.
For example, an SMSF that owns pink diamonds would not need to comply with the rules because they’re not on the list.
But if they were set in a ring, things would change. At that point, the SMSF would need to comply with the collectable rules as jewellery is a specific category listed.
Of course, even assets not on the list are subject to the usual rules for SMSFs. Most importantly, the sole purpose test will always apply – have the assets genuinely been acquired with the sole purpose of boosting members’ retirement savings?
Are collectables common?
Given all the extra rules it’s not surprising that many SMSFs no longer hold collectables. Those that do tend to do so because the trustees have particular expertise in the area and are more confident investing the members’ retirement savings in assets they know well.
