Over 410,000 Self Managed Super Funds (SMSF) in Australia will be banned from investing in collectibles and ‘personal use’ assets like jewelery and exotic cars if recommendations from the Cooper Review come into effect.
The Cooper Review into Superannuation, headed by former ASIC commissioner Jeremy Cooper, handed down its third-phase preliminary report yesterday, SMSF Phase Three – Preliminary Report, dealing with the issue of Self Managed Super Funds.
Jeremy Cooper and the panel agreed that SMSF trustees needed to be free to choose their own investments, however drew the line at investments in ‘collectables’ and personal use assets such as paintings, jewellery, antiques, stamp collections, wine, exotic cars, golf club memberships and boats.
“The panel accepts that some of these types of assets may appreciate in value over time and investors with the appropriate specialist knowledge can profit out of them,” said the report.
“Whichever way we look at it, SMSFs are here to stay, but we want them to focus more on investing for retirement savings, rather than related party transactions, collectables and leverage,” Mr Cooper said yesterday.
“We’re concerned about the detail on that. The legislation will have to be very careful about prescribing what exotic investments are,” Sharyn Long, chair at the SMSF Professionals’ Association of Australia (SPAA) told InvestorDaily
“We’re very pleased that the review has made the comment that SMSFs are effective and are here to stay and they do have an important role to play in the industry,” she said.
Fortunately SMSFs that already own these assets that are to be banned if the Cooper Review’s recommendations become law will have a 10 year transition period to dispose of them ending 30 June 2020.
The Cooper Review also recommends administrative penalties against SMSF trustees who are found to be breaking the rules, not just penalties payable by the fund itself.
“The panel has recommended the legislation be amended to provide the ATO with the power to issue administrative penalties against SMSF trustees on a sliding scale reflective of the seriousness of the breach,” said the report.
“The penalty should not be payable from the corpus of the fund and may be applied jointly or severally against the trustees or trustee directors.”