Insurance, Investments, SMSF

Guidance doesn’t negate insurance duty

SMSF collectables ATO guidance insurance

ATO guidance on what constitutes a collectable does not remove a trustee’s responsibility under superannuation laws to properly store and protect any asset.

SMSF trustees holding diamonds or bullion in an undeveloped form should not downplay their responsibility to properly insure and store those assets, despite recent ATO guidance stating the collectable rules do not apply.

Accurium senior SMSF educator Anthony Cullen said guidance released in December last year that stated natural diamonds held in loose form were not considered collectable or personal use assets under superannuation laws did not negate other obligations to protect those assets.

“There are specific rules around collectables both in the SIS (Superannuation Industry (Supervision)) Act in section 62A and in SIS regulation 13.18AA and there are rules around storage and insurance and use of the collectables and personal use assets,” Cullen said during an online briefing today.

“The difference here is we are looking at gemstones in their natural form that have not been attached to a ring, bracelet, necklace or anything like that and as soon as you convert that into a form that it can be worn, mounted and so on, then you are getting into the realms of collectables.

“With loose gems they are not a collectable and so we don’t need to apply the rules related to insurance where you have got to have collectables insured in the name of the fund within seven days of acquiring the asset.”

He highlighted the ATO’s view on this could be found in QC73738, but also reminded trustees to not be careless in their handling of these fund assets.

“The same page also states trustees should still carefully consider whether the asset should be insured and make sure they are appropriately stored because that will be the practice of a prudent trustee looking after the assets of the fund,” he said.

“In talking about prudent trustees, the ATO is talking about the trustee covenant requirements in section 52B [of the SIS Act], which states trustees have to act in the best financial interest of the beneficiaries and have to act as an ordinary, prudent person would be if they were dealing with another person’s property.

“So, just because you don’t have to have an asset insured, it’s probably a good idea to consider it.”

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