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Dear Sir/ Madam
My client has invested in motor bikes. Motor bikes are very old some of them were manufactured in the year before 1990. I have obtained an email from the trustee that the motor bikes are not for use and for sale when they get better sale price. They have obtained insurance for all motor bikes. My questions are as follows:
Investment in motor bikes are treated as collectibles in this case, is this correct?
Trust deed says that any investment that allows superannualtion laws, so this is covered, isnt' it?
This is the first year of the SMSF and all motor bikes purchased in this year. Do they need to get the valuation report?
And Do I need to get the trust declaration stating that motor bikes are collectibles and they are not for use. They are stored in the safe place. Trustess beleive that this investment will provide better return to the SMSF and they meet self purpose test. Please let me know if I need to get the trust declaration.
Thanking you in advance.
Kind regards,
Dipak Mehta
Hello Dipak
Thanks for your question.
An investment by a superannuation fund in motorcycles, is considered to be an investment in "motor vehicles".
Accordingly, the investment needs to meet the requirements of Regulation 13.18AA of the Superannuation Industry (Supervision) Regulations 1994.
Amongst other things the following requirements need to be satisfied by the trustees of a self-managed superannuation fund that have undertaken such an investment:
- The asset cannot be stored in the private residence of a member of the fund or at the private residence of a relative of the member of the fund
- The decision as to where the asset is stored needs to be recorded in writing and needs to be kept for at least ten years
- The asset must be insured in the superannuation fund’s name (and this insurance policy should have been obtained within seven days of the fund acquiring the asset)
- The asset cannot be used by a member of the fund or a related party of a member of the fund
- Should the asset ever be sold to a member of the fund or a related party of a member of the fund, the sale price must be the market value price as determined by a qualified independent valuer.
In relation to your specific questions, the following observations are made:
- Yes, the investment is treated as an investment in a collectable – hence the need to satisfy the requirements of Regulation 13.18AA as listed above
- Whilst the superannuation fund’s deed allows for the trustees to invest in any asset allowed for by superannuation law, it would be recommended that the fund’s investment strategy also expressly refers to the investment in vintage motorcycles
- In relation to satisfying the requirements that the fund’s asset is valued at its market value, mindful of Regulation 8.02B, it is recommended that the trustee confirm in writing that at the end of the year of acquisition the trustee if of the view that the market value of motorcycle is its purchase price
- The trustee representation letter should confirm that motorcycles are not used for private purpose.
It would be recommended that as auditor you request a copy of the written record of the decision in relation storage (and the trustee could confirm in the representation letter that the asset has not been stored at their private residence or at the private residence of a relative).
Similarly, the trustee/accountant for fund should also provide a copy of the appropriate insurance certificate/policy document.