The law governing Insurance for Art & Collectables
Lets start at the start.
If you have art or collectables within your SMSF, then you need to be aware of, and comply with, the new rules that govern them, otherwise you’ll be in trouble (e.g fines, funds complying status etc). One of the new rules relates to insurance.
The regulations require that all art and collectables are insured in the name of the fund within seven days of acquisition:
The rules apply immediately to all new investments in these assets made on or after 1 July 2011.
If your SMSF held an investment prior to 1 July 2011, it has until 1 July 2016 to comply with the rules.
What are the key issues?
1. The policy must be in the name of your SMSF.
2. You are not allowed to cover these items under:
Home & Contents policy.
Business Contents policy.
The insurance program of an art gallery or museum or storage company, even if they separately identify your asset.
3. You can have a group policy to cover all your fund art & collectable assets provided that they are clearly identifiable as fund assets.
What if you can’t get insurance? The ATO has less sympathy for you than you might hope. In essence, trustees need to give consideration to their ability to comply with all the regulations prior to making the investment. In other words, you need to think about the availability of insurance before making the investment. Fortunately you can get insurance with us!
We have several clients who purchased assets before 1 July 2011 but also after 1 July 2011. What do they do? The answer is that they need insurance to cover the post 1 July 2011 assets. They can then choose if and how they want to insure the pre 1 July 2011 assets. In many cases the cost of the art insurance won’t change to include the extra items, so the decision becomes very clear. For example, a client has $15k of rare books they bought in January 2012, and had them securely stored. They also had $20k of rarare books (in same location) they acquired before 1 July 2011. Our cost to insure the $15K of books was the same to insure the full $35k of books.