The ATO has reminded trustees of self-managed super funds (SMSFs) that if their SMSFs have investments in collectables or personal-use assets that were acquired before 1 July 2011, time is running out to ensure they meet the superannuation law requirements for these assets. From 1 July 2011, investments in collectables and personal-use assets have been subject to strict rules under the superannuation law.
Assets considered collectables and personal-use assets include artwork, jewellery, antiques, vehicles, boats and wine. Investments in such items must be made for genuine retirement purposes and not provide any present-day benefit. Under the rules:
- items can’t be leased to or used by a related party;
- items can’t be stored or displayed in a private residence of a related party;
- decisions about storage must be documented and the written record kept; and
- items must be insured in the fund’s name within seven days of acquisition.
In addition, a qualified independent valuation is required if such an item is transferred to a related party.
For investments held before 1 July 2011, SMSFs have until 1 July 2016 to comply with the rules. The ATO has said that SMSF trustees need to promptly consider and take appropriate action, which may include reviewing current leasing agreements, making decisions about storage and arranging insurance cover.
For trustees considering disposing of these items, the ATO has said they can be transferred to a related party without a qualified independent valuation, but only if the transfer takes place before 1 July 2016 and the transaction is made on arm’s-length terms.
Since trustees have had since July 2011 to make arrangements, the ATO expects that they will ensure all requirements are met before the deadline.
ATO’s eye on insured “lifestyle” assets
In January 2016, the ATO advised it was working with insurance providers to identify policy owners on a wider range of asset classes, including marine vessels, aircraft, enthusiast motor vehicles, fine artwork and thoroughbred horses. It has since gazetted a notice formally announcing the data-matching program.
The ATO will acquire details of insurance policies for these “lifestyle” assets where the value exceeds nominated thresholds for the 2013–2014 and 2014–2015 financial years. The asset thresholds are as follows:
- marine vessels: greater than $100,000;
- aircraft: greater than $150,000;
- enthusiast motor vehicles: greater than $50,000;
- fine art: greater than $100,000 per item; and
- thoroughbred horses: greater than $65,000.
The ATO will obtain policyholder identification details (including names, addresses, phone numbers and dates of birth) and insurance policy details (including policy numbers, start and end dates, information about assets insured and physical locations of the assets).
The data-matching program will assist with profiling taxpayers; that is, it will provide the ATO with a more comprehensive view of taxpayers’ accumulated wealth. It will also assist with identifying possible compliance issues. Among other things, the ATO is looking at whether SMSFs are acquiring assets but applying them to the benefit of the fund’s trustee or beneficiaries.
It is estimated that records of more than 100,000 insurance policies will be data-matched.
Please contact our office for further information.