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Investing in collecting: using your SMSF to buy art and wine

smsf collecting collectables wine art antiques coins

Collectables or personal-use assets such as artwork, antiques, rare coins and vintage wine can be very lucrative investments.

If you are considering investing in collectables via your self-managed super fund (SMSF) there are rules that you need be aware of.

Primarily, the investment must satisfy the “sole purpose test”. The sole purpose of a super fund is essentially to provide retirement benefits for its members, rather than a benefit now.

Furthermore, the investment must fit within the fund’s investment strategy, which must reflect the fund’s purpose and circumstances and take into account risk, diversification and liquidity.

An investment in a painting by a famous artist may be great in the long-term but will it be able to provide for the member’s retirement if it was the fund’s only investment?

Are there ready markets available to sell the painting if a member is to be paid a pension or lump sum out of the fund?

Perhaps more relevant is the question, “Are the members receiving a benefit from the painting now or is it truly purchased to provide for their retirement?”

Other super fund investment rules relating specifically to collectable and personal-use assets are that these assets cannot be leased to a related party, used by a related party or stored or displayed in a private residence of a related party.

Also the collectable must be individually insured in the fund’s name within seven days of purchase and if it is transferred to a related party it must be at market price as determined by a qualified, independent valuer.

Hence an investment in a collectable in your SMSF may be financially rewarding but it can also be onerous and problematic.

Written by Andrew Yee

Andrew Yee

Andrew Yee is director of superannuation for HLB Mann Judd.

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