The ATO has advised that SMSF trustees should consider the availability and cost of insurance before making an investment in collectable and personal-use assets.
In an update, the regulator noted specific investments held for retirement income purposes, including artwork, jewellery, vehicles, wine and antiques, need adequate insurance policies within the fund to protect the asset from loss or liability.
It reminded trustees that collectable and personal-use assets inside an SMSF must be insured in the name of the fund – either under separate policies or under one policy – within seven days of acquisition.
Assets could not be covered by insurance policies that were held personally by a member, such as a home and contents insurance policy, nor was it sufficient that a third party owned the policy or for the fund to be noted on a policy owned by a third party as a named insured or beneficiary, it pointed out.
It noted that naming the fund the owner of the policy will help provide evidence of fund asset ownership, provide control over negotiating the terms of the policy and making a claim under the policy.
In circumstances where an SMSF fund is unable to obtain insurance, it encouraged trustees or members to notify the ATO using the SMSF early engagement and voluntary disclosure service.
In addition, the regulator has advised that collectables and personal-use assets can only be sold to a related party if the sale is at market price as predetermined by an independent valuer who holds formal valuation qualifications or has experience and knowledge in the professional community.
The ATO recently released updated guidelines in regards to the valuation of assets inside an SMSF to improve the likelihood of that valuation being accepted and ensuring the fund complied with laws involving the acquisition of assets.