An SMSF can invest in artwork (artwork, collectables and personal use assets) to a maximum value of 5% of the total Fund value. You can’t hang artwork in your house before you reach retirement age. The artwork should be stored in a vault, away from sight or be loaned to an art gallery. Alternatively, the artwork may be exhibited if a market related rent is paid to your SMSF for the use of the asset.
Artworks are seen as collectables, and as such, the Trustees need to ensure that fellow members are not granted the right to use or access them in contravention of the sole purpose test. One of the most common breaches of the sole purpose test is investments that offer members a pre-retirement benefit such as enjoying an artwork.
Stricter Rules for collectables and personal use assets
Since 1 July 2011 more stringent rules on investment in artwork and collectables have been in effect. These tightened rules state:
- the artwork must not be leased or used by a related person;
- the artwork must not be stored in a Trustee’s private residence;
- anydecision concerning the storage of the item must be recorded in the SMSF minutes; and
- if the artwork is sold to a related party it must be independently valued.
- The ATO website carries a question and answer section devoted to collectables. Click on this link to see it.
In conclusion, an SMSF can invest in artwork, but if you want to enjoy it before you retire, you’ll have to buy it for your own money and not the fund’s.