Uninsured collectables creating compliance risks
Australians have $660 million invested in arts and collectables, but a "significant proportion" of these assets are uninsured, according to Self Super Insurance.
Where the assets are held within a self-managed superannuation fund (SMSF), the trustee risks breaking the law if the assets remain uninsured.
Under the new regulatory regime, SMSFs that purchase arts and collectables have seven days to insure them. Art and collectables that were purchased prior to 1 July 2011 must be insured by 1 July 2016.
According to Self Super Insurance managing director John Kelly, many of these assets are held in "poor safety environments" and are also at risk of being stolen.
"Given that the destruction of the asset, if uninsured, would represent a material negative impact on the members' savings, this is quite surprising," he said.
In addition, some trustees do not understand that arts and collectables must be insured separately from other assets.
"Many SMSFs don't realise their assets are actually not insured by their home and contents policy, because a lot of standard policies specifically don't extend to art or collectables," Kelly said.
He said SMSFs holding arts and collectables purchased before 1 July 2011 should insure them now, since in the lead up to the 2016 deadline there will be a rush to secure valuations and store assets in appropriate locations.
"If SMSFs leave it to the last minute then they will find themselves in risk of a compliance breach and higher costs, so our advice would be to deal with the storage and insurance early. Irrespective of your legal obligations, it is good financial sense and good corporate governance to manage your risks now anyway," Kelly said.
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