The sole purpose test was amended in July 2011 to require SMSF trustees that held personal use or collectible assets (eg, art, cars, boats, jewellery, wine) to:

  • not lease them to or allow them to be used by a related party
  • not store them in the private residence of a related party
  • record in writing decisions relating to storage
  • insure within 7 days of acquisition in the fund’s name
  • have them independently valued if they are disposed of to a related party

While the rules applied immediately for new collectibles, a 5 year transition period applied for those held at 30 June 2011.

This transition period ends on 1st July, which means that all SMSF’s will need to comply with the above requirements in respect of all personal use and collectible assets. If the SMSF has collectibles covered by the transition period it will need to decide to:

  • take action to ensure the rules are complied with from 1st July
  • dispose of the assets prior to 1st July

SMSF trustees that retain these assets but don’t abide by the new rules may face significant penalties.

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Disclaimer and Warning
The information above is of a general nature only. It should not be used as a source to make financial decisions. It’s also important to note that the legislation and figures related to this topic tend to change regularly and therefore the information above may not reflect the current status. We recommend that if you are looking for advice on this matter, you should contact us.