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What are the rules for artwork in SMSFs?

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I have a family friend who has great artworks, which he has on display in his house but he says he owns them through his super fund. Is this possible?

The simple answer is that you can buy art through a self-managed super fund (SMSF) but it’s illegal to have them on show in your house. The rules say you have to have the artwork, which is an investment asset, wrapped up and stored.

Right now the Government has a mind to change the rules concerning artwork and other collectibles inside SMSFs, but at this stage it has not made up its mind.

The most important rule to remember when it comes to any asset bought for a SMSF is what is called the sole purpose test. This sole purpose is that decisions are made to “provide for the retirement benefits to members”. That means if you buy art to enjoy the view for 30 years and then later you sell it for a great profit that helps your members of your fund then you have got it half right. The part you got wrong was hanging the ‘investment asset’ on your wall for the purpose of enjoying the view!

Storage will be covered by the new rules when they come and issues such as leasing the asset to a business will be defined in a new way. Any such leasing will be linked to a commercial arm’s length arrangement and, by the way, this gives the super fund a second source of income but you need to make sure it’s insured and you have to ensure protective measures are in place wherever it’s stored.

For the moment, I would suggest you go to the Australian Tax Office website and get the taxman’s current set of rules and keep watching this space for the update when it comes.

For advice you can trust book a complimentary first appointment with Switzer Financial Services today.

Important information: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.

Published on: Wednesday, April 06, 2011

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