SMSF practitioners and advisers should be alert to the fact the ATO does not consider gold or diamonds as collectibles and they will only ever be viewed as physical assets held by a fund, the head of a technical services team has noted.
BT head of financial literacy and advocacy Bryan Ashenden said gold and loose diamonds were not covered by section 62A of the Superannuation Industry (Supervision) (SIS) Act, which covers personal-use and collectible assets, despite many people believing either or both could be classified as such within their funds.
“Neither of them are subject to the personal-use and collectibles restrictions, and the question is do you think loose diamonds are actually jewellery, [which is covered by that section],” Ashenden said in an adviser briefing yesterday.
“The general position the ATO has is that loose diamonds themselves are not covered by the SIS Act because they are not in a form where they can be put into jewellery or used for the purpose of jewellery.
“It hasn’t been set or changed to be able to use as jewellery, but if it was a diamond that was ready to be placed into jewellery, then that’s a different issue.
“If it’s a loose diamond, then it’s not subject to these personal-use and collectible restrictions because how you can personally use it in that particular form.”
He said the same logic applied to gold bullion and the ATO could question how its value would increase as a personal-use or collectible asset.
“When you look at gold bullion – what’s it worth? It depends on what the gold price is at a particular point in time,” he said.
“It’s not an asset that will increase in value above what its face value is now, but if for some reason that happens, then you might have a different approach, but generally with physical gold bullion its worth whatever the price of gold is at the particular point in time.
“As such it’s not a personal-use or a collectible type of asset, but just a physical asset the SMSF happens to have at that particular point in time.”
During the briefing, he noted only 22 per cent of attendees correctly identified these rules, while 48 per cent said both assets could come under the personal-use and collectibles restrictions.
