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Acquiring collectibles inside your SMSF

Before acquiring a new asset to your SMSF, you should ask the “why”.

The purpose of a fund is to provide retirement benefits to its members or their dependents if one of the members dies before retirement. The sole purpose test (section 62 of the Superannuation Industry (Supervision) Act 1993) must be followed, and if your new collectible does not fulfil this purpose, you have an issue.

For instance, you are looking to purchase a vintage car. The first question is whether the acquisition is a viable investment or a desire of the members. Does the collectible increase the investment or protect members’ retirement savings?

The sole purpose test covers how the collectible is managed when acquired. If the asset is only for the member’s retirement benefits, the members can not use or enjoy it. It indicates that:

  •  The collectibles can not be stored at the trustee’s residence or office;
  • Using or leasing the collectible can only be commenced with an unrelated party;
  • The collectible must have its insurance policy owned by the SMSF;
  • If a collectible is sold to a related party, it must be sold at market value.

It demonstrates that you can not stay in a holiday home, drive a vehicle, or enjoy artwork owned by your SMSF.

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