What are Collectables and Personal Use Assets?
Collectables and personal-use assets are investments typically enjoyed for personal pleasure or everyday use. However, when acquired by a super fund, they must serve genuine retirement purposes and comply with the sole purpose test, providing no present-day benefits. These assets, known as SMSF collectables and personal use assets, must be managed carefully to ensure compliance and maximise benefits in line with SMSF collectables rules.
Specific Examples of SMSF Collectables and Personal Use Assets
- Artwork (including paintings, sculptures, and reproductions)
- Wines or spirits
- Motor vehicles and motorcycles
- Memberships of sporting or social clubs
- Postage stamps or first day covers
- Antiques
- Coins, medallions, or banknotes
– Coins and banknotes are collectables if their value exceeds their face value
– Bullion coins are collectables if their value exceeds their face value, and they are traded at a price above the spot price of their metal content
At the end of June 2023, Australian SMSFs (Self-Managed Superannuation Funds) held $566 million in SMSF collectables and personal use assets. Based on the December 2025 ATO SMSF Quarterly Statistical Report, there are now 663,867 SMSFs in Australia, with total estimated assets reaching $1.06 trillion.
Benefits of SMSF Collectable and Personal Use Assets
Investing in collectables, permitted by an SMSF’s trust deed and investment strategy, can diversify investments and spread risks. Additionally, some collectables appreciate over time, potentially increasing capital growth.
SMSFs also benefit from tax concessions, such as a lower tax rate on income and capital gains. These concessions can be particularly advantageous when collectables significantly appreciate in value.
Risks of SMSF Collectable and Personal Use Assets
Investing in collectables must solely enhance retirement savings and comply with SMSF collectables rules. Violating the sole purpose test can result in the super fund being taxed at the highest marginal tax rate, losing compliance status, and exposing individual trustees to civil and criminal penalties, including fines and imprisonment. Corporate trustees face even higher penalties.
Proper storage and insurance of collectables can be costly, reducing the overall return on investment. Valuing these assets can also be subjective, leading to potential disputes with the ATO, which may affect an SMSF’s compliance and tax status.
For the 2022 financial year of audits, SMSF auditors reported 240 contraventions for funds breaching the collectable rules as of September 20, 2023.
SMSF Collectables Rules and Ongoing Compliance Responsibilities
Understanding SMSF collectables rules goes beyond meeting initial acquisition requirements. Trustees must demonstrate ongoing compliance throughout the lifecycle of the asset, ensuring that all decisions align with the sole purpose test and broader regulatory expectations.
Unlike traditional investments, collectables are subject to heightened scrutiny due to their potential for personal enjoyment and subjective valuation. This means trustees must take a more structured and well-documented approach to ownership, storage and decision-making.
One of the most important responsibilities is maintaining a clear separation between the asset and any personal use. Even indirect benefits, such as displaying artwork in a related party’s office or storing items in a private residence, can result in a breach. Trustees must ensure that all arrangements are defensible and appropriately documented.
Documentation and Audit Readiness
Proper documentation is essential for demonstrating compliance with SMSF collectables rules. Auditors will assess whether trustees have maintained sufficient records to support every stage of the investment, from acquisition through to valuation and eventual disposal.
Key documentation should include:
- Evidence of purchase at market value
- Insurance policies held in the fund’s name
- Independent valuations supporting reported asset values
- Storage agreements confirming compliance with ATO requirements
- Records of any lease arrangements with unrelated parties
Failure to maintain adequate documentation is one of the most common reasons collectable investments are flagged during an audit. For a broader view of what auditors examine, refer to the SMSF auditor compliance checklist.
Portfolio Impact and Trustee Decision-Making
Before acquiring collectables, trustees should consider how these assets fit within the SMSF’s overall investment strategy. While collectables can offer diversification benefits, they also introduce unique challenges, particularly around liquidity and valuation.
Because these assets are often difficult to sell quickly, they may limit the fund’s ability to meet short-term obligations. This is especially relevant for SMSFs with multiple members or those approaching retirement, where access to liquid funds becomes increasingly important.
For funds with several members, decision-making can also become more complex. Differences in risk tolerance or investment preferences may affect how collectables are managed within the portfolio. Understanding these dynamics is critical, particularly in larger funds, as outlined in the benefits and risks of a 6-member SMSF.
Avoiding Common Compliance Pitfalls
Even well-intentioned trustees can encounter issues when managing collectables. Some of the most common pitfalls include:
- Failing to obtain insurance within the required timeframe
- Allowing related parties to access or use the asset
- Relying on informal or non-independent valuations
- Inadequate record-keeping to support compliance decisions
These issues can trigger regulatory scrutiny and may lead to penalties or adverse audit outcomes. Taking a proactive approach to governance and seeking professional advice can significantly reduce these risks.
ATO Rules for SMSF Collectables and Personal Use Assets
The ATO has established strict SMSF collectables rules to ensure these assets are held solely for retirement purposes and not personal use.
Display or Storage
Collectables and personal use assets cannot be stored in the private residence of any related party. This includes all parts of a private dwelling, such as garages or sheds. They can be stored (but not displayed) in premises owned by a related party, provided it is not their private residence.
Insurance
The fund must insure collectables and personal-use assets in its name within seven days of purchase. Being the policy owner demonstrates the super fund’s ownership, safeguards assets against monetary loss or liability, and ensures insurance proceeds are payable directly to the fund.
Usage and Lease
Collectables and personal use assets must not provide a present-day benefit. Therefore, members or related parties cannot use these assets. For instance, if the SMSF owns a vintage car, a member or related party cannot drive it, even for maintenance or restoration.
These assets can only be leased to an unrelated party, and the lease must be on arm’s-length terms.
Selling
Collectables and personal-use assets can be illiquid, posing challenges when accessing funds in the SMSF. However, they can be sold to a related party at market price, as determined by a qualified independent valuer.
Market Value
Regularly valuing collectable assets ensures they are recorded at their market value, which requires a qualified independent valuer.
A valuer must either hold formal valuation qualifications or be considered knowledgeable, experienced, and judicious by their professional community. Moreover, the valuer must be independent of the fund’s interests, meaning they should not be a member of the fund or a related party (e.g., an investment partner).
Investing in collectables and personal assets requires understanding all rules to avoid breaches that may lead to tax implications and penalties. Trustees should consider investing in assets they know well and seek professional help to maintain SMSF compliance and ensure retirement income growth.
Partner with National Audits Group
At National Audits Group, we specialise in helping accounting practices manage SMSFs efficiently. We assist trustees in achieving their retirement goals and ensuring compliance with all relevant regulations. Reach out to us to experience our excellent service through approachable and pragmatic audits.
Renzel Robinos, Auditor, National Audits Group
Disclaimer: This information is general in nature and does not take into account your specific financial situation, objectives or needs. SMSF trustees should seek independent financial, legal and taxation advice before making any investment decisions, particularly when dealing with collectables and personal use assets, to ensure compliance with all applicable laws and regulations.