With a growing need for Aussies to become self-funded retirees and the emphasis on the importance of superannuation fund investments, individuals are opting to setup their own “Self Managed Superannuation Funds” (SMSFs) to take advantage of the broad investment opportunities SMSFs offer.
As a trustee of a SMSF you ultimately make the decision as to how the fund should be invested. You make the decision as to what portion of the fund should be allocated to Australian Shares, International Shares, Property, Term Deposit, Bonds or even Watches (ie. Collectibles)
What we are seeing recently is avid watch enthusiasts, collectors and investors are turning to their superannuation fund savings to invest in luxury watches with the expectation that these assets will ultimately assist to fund their retirement. Speculative as watch “growth” may be, those who research watch trends based on brand, innovation, detail, movement etc, are showing confidence in their choice to invest in watches using their superannuation savings.
However using superannuation fund savings comes with strict rules from the Australian Tax Office (ATO) and therefore it becomes important to have a Financial Planner to assist in the investment process. Before even investing in watches in super, there needs to be proof of research undertaken to invest in the particular watch. There needs to be evidence of how the decision to investment is that particular watch was concluded – why that asset over others?
Once the SMSF has purchased the watch, the following regulations strictly apply:
1. Not Stored in Private Residence
The watch cannot be stored at the private residence of any related party of the SMSF, specifically at the primary residence of an individual. This does not refer to a location such as a place of business or specially constructed storage facility. However, whilst it is possible to store collectibles in the business premises of a related party, they cannot be placed on display.
2. Reasons for Storage must be in Writing
An SMSF must also document why they stored the watch at a particular location, with the documentation being kept on file for 10 years.
3. Maintain Insurance
SMSF trustees must also ensure the watch is insured in the name of the superannuation fund and the insurance must be in place within seven days of the asset being purchased.
4. Valuation by Independent Party
When a super fund sells a watch to a related party, the super fund must get an independent valuation of the item and the agreed sale price cannot be less than that valuation.
5. Not leased to a Related Party
The watch must not be leased to any related party of the SMSF. A related party of the SMSF includes the members of the SMSF, their relatives and any partnerships, partners of partnerships (if a member is in partnership with them) trusts and companies that members of the SMSF control. The ATO has already warned that it will be strongly policing rules prohibiting the leasing of collectables to related parties and ensuring they are independently valued.
As the new financial year commences, looking into setting up a self-managed superannuation fund is an avenue worth looking into. SMSFs are highly regulated and are strategically technical vehicles. Financial Services firms like The Hopkins Group specialize in helping individuals setup and invest in collectibles like watches with the big picture in mind; retirement planning with a diversified approach whilst making sure all compliance matters are looked after to ultimately work towards your retirement goals.
Collectors would vouch that watches can be great investments but making sure you get appropriate SMSF advice and to also research the right investment is crucial and recommended.
Financial Adviser & Authorized Representative of Wealthsure Financial Services Pty Ltd
The Hopkins Group