SMSF trustees are broadly unprepared for the impending changes to the collectibles rules that come into effect from July next year, according to one major administrator.
Speaking to SMSF Adviser, AMP SMSF’s administration head of technical services Phil La Greca said while requirements for collectible assets around insurance, storage and valuations are already in place for collectibles acquired from July 2011, collectible assets acquired prior to this will also need to comply from July next year.
“I think [trustees] are putting it off; whenever there’s a deadline, people put it off to the last minute in the hope that the deadline gets changed or moved,” said Mr La Greca.
“There have always been issues; even now the rules have been in place since 2011, [but] you still see articles coming out saying they need to reverse the rules because they’re hurting the art industry.”
Mr La Greca said those holding grandfathered collectibles in their SMSF will need to “start seriously thinking over the next 18 months whether or not they can actually comply with the new rules”.
“From an adviser view point, if you have clients with collectibles in their SMSF, now is the time to start asking clients what they are going to do,” he said.
“[Advisers] need to reinforce the message that clients haven’t got long, that they need to find an insurer, somewhere to store it that complies with the rules and what it is going to cost.”
Mr La Greca said advisers need to make their clients aware that if the collectible asset isn’t generating any income, then the other assets in the SMSF will have to pay for the costs associated with keeping it in the SMSF.
“It’s all well and good to say, "Well the asset doubled in value in three years because it’s a $10,000 asset that doubles to $20,000" but if I spend $5,000 a year storing it and insuring it, then I haven’t made any money have I?” he said.
Written by Miranda Brownlee
Tuesday, 03 February 2015