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May 23, 2022

Insurance - "in name of fund"

in SMSF Technical Forum

Hi all. I have searched but could not find a similar question but apologies if already asked.

Auditing a fund which owns a large diamond - stored securely at jeweller's vault and covered by jeweller's insurance.

In last years management letter lack of insurance in funds name was brought up. The fund still does not have its own insurance on the diamond.

Is there an issue with:

lack of insurance
Failing to address an issue raised in a previous management letter? (given this was not a contravention in the first place)

Thanks very much for any opinions.

1 answer0 replies

Comments (1)

THE AUDITORS INSTITUTE

May 23, 2022

Best Answer

Hi Matthew

The ATO explains the collectable / personal asset rules at:

https://www.ato.gov.au/super/self-managed-super-funds/investing/restrictions-on-investments/collectables-and-personal-use-assets/

I assume (& understand that) diamonds will be a collectable / personal use asset by it being deemed to be in the classification of "jewellery". On that basis SIS Regulation 13.18AA will apply & the diamond has to be insured in the name of the Fund within 7 days of acquisition. If there is no insurance in the name of the Fund this a breach of SIS Reg 13.18AA.

If your Trustee were to argue that the diamond is not considered as "jewellery" I would recommend that they obtain a private binding ruling from the ATO to support their view.

Thanks

SMSF AAA