Superannuation

Reader’s question: I have a do-it-yourself super fund that last year purchased an amount of gold and silver bullion, which I am storing safely at home.

My accountant has indicated that, from July 2012, this will not be allowed. I am now inclined to put the metal in a safe deposit box at a bank and insure it with an insurance company.

Is this appropriate?

It appears your accountant is referring to the new collectables rules that were introduced from July 1, 2011, responds lawyer Daniel Butler of DBA Lawyers.

Under these rules any collectable acquired by a DIY fund on or after this date cannot generally be stored at a member’s private residence. It must also be insured, must not be used by a related party – a member of a fund is a related party – and the decision regarding storage must be documented.

Long list

There is an extensive list of investments formally described as collectables. A collectable is defined as artwork, jewellery, antiques, artefacts, coins, medallions or bank notes, postage stamps or first day covers, rare folios, manuscripts or books, memorabilia, wine or spirits, motor vehicles, recreational boats and memberships of sporting or social clubs.

The nearest thing to gold and silver bullion is coins, medallions or bank notes. Therefore, the collectable rules do not apply to your bullion investments. Your accountant seems to be confused with these rules. The dates advised are also incorrect as the collectable rules started on July 1 2011.

June 2016

If you did have a collectable, such as an artwork, that was acquired before July 1, your fund has until June 30, 2016, to comply with the new collectable rules.

Your DIY fund can continue to store the bullion at your home even beyond July 2016, although there are other reasons why you might reconsider this decision.

One technical point to bear in mind is that having the bullion at home might be regarded by some to be a “control” in the nature of a lease agreement. The definition of a “lease arrangement” in the Superannuation Industry (Supervision) Act can mean any agreement, arrangement or understanding in the nature of a lease – other than a lease – under which a person uses or controls the use of property owned by the fund.

In-house assets

This control could technically result in the bullion investments being regarded as in-house assets which, among other things, are fund assets subject to a lease or a lease-like arrangement between the trustee of the fund and a related party of the fund.

If this interpretation, which is not widely recognised, is accepted then the bullion value must not at any time exceed 5 per cent of the total market value of all the fund assets.

If it did, then this would be a contravention of the in-house asset provisions with potentially serious consequences. For this reason, Butler recommends not storing the bullion in your home unless you obtain written DIY fund advice from the Australian Taxation Office.