Self Managed Super Funds (SMSF) The brakes are on buying art.… Why?

Self Managed Super Funds and Investing in Art | ArtAffair.com.au

Self Managed Super Funds and Investing in Art | ArtAffair.com.au

I have written this piece because several of our clients are still not aware of this change in circumstances and how it affects them.

The previous Federal Government (Labor) in July 2011, removed the incentives for trustees to purchase art via a Self Managed Super fund! This act directly effected businesses i.e. those involved with a Superfund.

Therefore a trustee, member of the fund or beneficiaries cannot be involved with a business that may be involved or linked to the fund in any way. SMSF can continue to buy artworks and collectables such as stamps, coins, vintage cars, etc however the artworks will need to be stored independently.

This means that trustees cannot have art held at their office or home under any circumstances. Those existing SMSF holding art prior to these new rulings, are able to hold art up till May 2016, prior to the new rulings of storing art on ones premises becomes law.

For a more detailed analysis go to:-

http://www.superguide.com.au/comparing-super-funds/smsf-investment-art-collectors-subject-to-stricter-guidelines

In my opinion Governments should not be in the business of telling what investments one should be involved with, providing it is lawful.

Governments have legislated strict guidelines for SMSF trustees to follow and adhere to such that prudent investors are well aware of recognising the onus is placed on the trustee to perform within the SMSF guidelines. I believe art and other Collectables should be reinstated and available for SMSF to purchase without these new restrictions and limitations.

What’s relevant here is the need for an investor to seek out more advice before purchase. Perhaps any investment for a SMSF should have a 5 point criteria to apply to purchasing. In this example I have applied these criteria to artworks only, however the example can be applied to other collectables after modifying the criteria for the different asset classes:-

(i) Justification and analysis of the authenticity of the artwork. Where no direct provenance then professional opinions should be sought. This isn’t to be a Government department job but industry regulated!

(ii) An assessment of the artwork as to its collectability? This is the first stage of qualifying whether an artwork is deemed to be worthy of purchase. Inadequate artworks could be dismissed initially because they are not deemed to be of a collectable nature.

(iii) A condition assessment – currently there is no assessment for condition. I believe one needs dated documentation with a digital image available for buyers/sellers. It then becomes a date of record.

(iv) An understanding of the intention of an art purchase i.e. why it is considered and/or why it was purchased for a SMSF. Some concepts are to be identified such that it is not seen as a random purchase!

(v) The reputation of the artwork is to be considered. Where the artist is maybe young or still developing one would need to provide a considered opinion of the artist’s potential and future intentions.

MW

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