Investors using an SMSF to invest in physical gold may find it difficult to label it as a collectable or personal-use asset and may be better served investing via a listed fund, according to a technical specialist.
BT Financial Group technical consultant Matt Manning said there were no restrictions on SMSFs investing in physical gold, as well as ‘paper gold’ via an exchange-traded fund (ETF) or listed gold fund, but the former was unlikely to be considered a collectable or personal-use asset under the Superannuation Industry (Supervision) Regulations.
Speaking during a recent online presentation, Manning contrasted an investment by an SMSF in a gold ETF, a one-kilogram gold coin and a five-ounce gold bullion bar and questioned which would be subject to the collectable or personal-use asset rules.
“It would be the gold coin. The bullion is not listed as a collectable and it would be generally regarded that, whether it’s bullion or coin, if we’re buying something just for the precious metal value, then that’s not actually going to be a collectable,” he said.
“In some cases, a gold coin might be a collectable if it’s a limited edition, or it’s particularly old or valuable, then in those cases the value is more than the precious metal value and it would be collectable because it fits better into the precious coins category then the bullion category.”
Addressing gold investments via an ETF, he said these may be more appropriate than holding physical gold as they avoid the complications that arise with the collectables and private-use asset rules, including where to store the gold, how to insure it and what to do if it is stolen.
“With paper gold, you don’t actually have gold bars, rather just somebody’s promise they are storing it as part of that fund, and some people don’t like that and would rather hold it themselves,” Manning said.
“I would argue a prudent trustee is still not going to let it go uninsured or let you store it in a hole in the garden and suggest it’s best to ask the SMSF auditor what their expectations are if the fund does decide to go out and buy physical gold rather than a paper gold via an ETF.”
