Regulations have been made setting out the rules for self-managed super fund investment in collectables and personal use assets from 1 July 2011

The Superannuation Industry (Supervision) Amendment Regulations 2011 (No 2) have been registered setting out the rules for self-managed superannuation fund (SMSF) investment in collectables and personal use assets from 1 July 2011. The Regulations complement the measures in Tax Laws Amendment (2011 Measures No 2) Act 2011.

The Regulations specify rules that prevent SMSF trustees from gaining current day benefit from an investment in collectables and personal use assets and ensure that such investments are made for genuine retirement income purposes.

Lifestyle assets subject to rules

New reg 13.18AA of the SIS Regulations applies to the following "section 62A items":

• artwork (defined within the ITAA 1997 as: a painting, sculpture, drawing, engraving or photograph; a reproduction of such a thing; or property of a similar description or use);
• jewellery;
• antiques;
• artefacts;
• coins, medallions or bank notes;
• postage stamps or first day covers;
• rare folios, manuscripts or books;
• memorabilia;
• wine or spirits;
• motor vehicles;
• recreational boats; and
• memberships of sporting or social clubs.

Investment restrictions - offences

Regulation 13.18AA provides that each trustee a regulated SMSF will commit an offence in relation to an investment involving a s 62A item if:

• leasing to related parties - the fund enters into a lease or "lease arrangement" with a "related party" (defined in s 10 of the SIS Act) in relation to an investment involving a s 62A item;
• storage of asset at private residence - the fund stores a s 62A item in the private residence of a related party. This will allow SMSF trustees to store a s 62A item in premises owned by a related party provided that the premises is not the home of a related party;
• documentation of storage decision - the fund does not keep a record of the reasons for the decision on where to store a s 62A item. This will require SMSF trustees to give consideration to what is appropriate storage for maintaining their s 62A item as an investment that produces retirement income rather than one that provides current day enjoyment;
• insured in fund's name - the fund does not insure a s 62A item in the name of the fund within 7 days of acquisition of the item. However, this requirement will not apply to memberships of a sporting or social club because these items generally cannot be insured;
• market price valuation - the fund disposes of a s 62A item to a related party at a price other than a market price determined by a qualified independent valuer.

Each of the above rules is a strict liability offence subject to a penalty of 10 penalty units ($1,100).

Date of effect

The Regulations commence on 1 July 2011. However, an existing investment in a s 62A item that is held by an SMSF on 30 June 2011 will not be subject to the regulations until 1 July 2016.

The final Regulations have been revised in a few respects from the draft regulations released on 18 May 2011. In particular, the final Regulations specify "bank notes" and "spirits" as s 62A items. The draft reference to "cars" has also been revised to "motor vehicles".