Since 2011 strict restrictions have been in place for self-managed super funds (SMSFs) wishing to buy artwork investments.
Those restrictions cover three broad areas:
1. insurance;
2. display; and
3. related party dealings.
In relation to the last two areas, the intent of the original legislation was to prohibit members from enjoying and having access to artworks owned by their super fund. The regulations made law the untested proposition that enjoying art owned by a super fund constituted a pre-retirement benefit, which is contrary to the sole purpose test of only holding investments for your retirement. A recent taxation ruling from the Australian Taxation Office (ATO) has loosened those requirements.It is now permissable for a company to store artworks that belong to its SMSF in its business premises, so long as those premises are not the residential property of one of its members.
In other words, SMSFs no longer have to store their artworks in expensive storage facilities if they own or lease commercial real estate for their business. Their super art may be stored there.
So what is the definition of ‘storage’?
According to the Oxford English Dictionary (OED) storage is ‘the action or method of storing something for future use’. It is also ‘space available for storing something’. Hanging paintings in the business premises of a member or associate of a SMSF should meet the definition of storage if there is no current use for the artworks. This is consistent with the sole purpose test and the need to prevent a possible pre-retirement benefit. Hanging paintings in an empty room is also consistent with these principles and should be seen as a storage method.
Of course the government could simply now amend section 62A of the SIS Act and allow companies to display their super art investments for the current enjoyment of their staff and visitors.
SOURCE, All rights reserved to – Michael Fox, Arts Accountant & Valuer, October 8, 2018, © 2019 Michael Fox | Arts Accountant & Valuer., Super Art update – ATO relaxes storage requirements, https://foxmichael.com.au/super-art-update-ato-relaxes-storage-requirements/
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