SISFA against new SMSF legislation

Self-managed super funds (SMSFs) investing in collectibles and art are already subject to a strict regulatory regime, making the proposed legislation unnecessary, according to the Small Independent Superannuation Funds Association (SISFA).

SISFA’s comments came in response to the Government’s draft legislation, released in early February, proposing the tightening of the standards around SMSFs investing in collectibles and art.

While acknowledging that steps needed to be taken to achieve higher standards of compliance in the SMSF market, SISFA stated that legislation was not needed in this instance.

Under various sections of the Superannuation Industry (Supervision) Act 1993 and Superannuation Industry (Supervision) Regulations 1994, SMSFs that currently want to invest in collectibles and art are required to undergo sole purpose tests, provide an investment strategy and financial assistance to members, among other obligations.

“Compliance with these provisions is a primary obligation of trustees and is then also subject to the approved auditor review process,” SISFA noted in its submission to Treasury’s Benefits and Regulation Unit.

“Contraventions can lead to a number of possible consequences, ranging from rectification action to penalties imposed by the [Australian Taxation Office],” SISFA wrote.

The association stated it did not consider there was sufficient merit in the argument for special rules applying to such select asset classes, “for the reason that there are not such rules requiring an SMSF to adequately insure its real property investments.”

In the draft legislation, the Government proposed that any collectables and personal use assets acquired from 1 July, 2011 satisfy new rules, which are yet to be finalised.

The Government has decided to continue to allow SMSFs to invest in art and collectibles under tightened standards, despite the Cooper Review recommending that such assets should be banned from SMSFs.