As a fund trustee I am responsible for the safekeeping of my fund assets. Australian banking legislation (if activated in financial crisis) would put my PM assets at risk of confiscation, a risk I am obliged to mitigate by superannuation law. Can anyone think of anything that is stopping me from sending or taking my PM overseas to a country that does not have such draconian requirements such as New Zealand or a Pacific Island nation for safe vault storage.
Interesting point - if the gold is held overseas, but managed by an Australian trustee, would it be liable for confiscation in the event of such legislation being re-enacted? Would need a legal eagle to look over the current clause in the banking act to see if gold held in trust would fall afoul of the confiscation, based on the current law.
Very interesting question - offshore storage of SMSF assets was discussed at last weeks Brisbane meet. We couldn't state for sure where you'd legally stand with such an action - definitely something to consider though.,,,
I might do a bit more research to find out the legal position. 1. Is it legal to store PMs offshore under the super laws (I know you can't buy real estate overseas) 2. Issues with posting or taking as baggage PMs overseas. 3. Issues with landing in another jurisdiction with PMs. If (when) the section of the Banking Act is activated by the Governor General the PMs won't be in Australia or under my direct control as I would have the safety deposit box key kept by a Solicitor or associate in that country. Therefore PMs safe from confiscation and Trustee is compliant with Australian laws. Just not the outcome the RBA might expect.
I think in that situation it would be a case of "all bets are off". Even if it were legal now, should the government ever move to confiscate people's gold then the law, as it is now, would mean sod all. They'd just change it. By that stage you'd have your gold safely tucked away overseas and no doubt some people would also be able to provide documentation that they'd sold the gold anyway or were no longer in possession of it. Perhaps they'd have the proceeds of the sale sitting in a foreign bank account (in the Cayman Islands for instance) or they'd sell the gold to their foreign solicitor, subject to a (private) repurchase agreement being in place so they don't technically own it any more but could get it back on demand.
Not that I know of. There is also the idea of unallocated holdings, if a business, such as a gold dealer can have gold as part of their business but an individual can't due to confiscation then what about unallocated? It is in the posession of a bullion dealer but it does not belong to them, neither can anyone ask me for my gold because until I pay a fabrication cost I don't own a specific bit of gold that I can physically hand in. Unallocated abroad would be even harder for anyone to confiscate. But also harder for you to manage. I don't hold the money in my SMSF, I can't get to it, I can't spend it on stuff I want so there is no real difference with me holding gold in my SMSF, still can't hold it, still don't really own it.
Well, in the interests of making a small start on this research ... For: PMs are not listed on the Australian Customs and Border Protection's list of prohibited and restricted exports: http://www.customs.gov.au/site/page4381.asp And the information on 'Currency' does not seem to apply to PMs: Question 3, Issues with landing in another jurisdiction with PMs, obviously depends on which country you're going to. So it seems the main question is number 1: Is it legal to store PMs offshore under the super laws. There's no mention of this on the ATO's 'Restrictions on investment's page: http://www.ato.gov.au/Super/Self-ma...nd-s-investments/Restrictions-on-investments/ That page refers on to the ATO guide Running a self-managed super fund, which says nothing about PMs. If anyone has more, please chime in!
I'm sure that as soon as the ATO learn people are taking physical assets owned by SMSF out of the country and out of their control, they will make a new Regulation ASAP to make it illegal.
How about investing in foreign stocks? If they did it I can see a market for allocated gold stored overseas in Australian listed ETFs.
What about the audit? You could simply claim that all your PMs were held OS while you topped up your silver to the max at 15% tax. Meantime you've cashed it in. I think that would bring you undone. If they can't see it, they can't audit it!
This is the crux of the issue. If I was auditing a fund that had physical holdings (and they were a significant, material part of the fund) I would probably want to see the metal. It would be the only way to test it in those cases and have any kind of assurance that you weren't actually doing what Sammy suggested. I can't think of any specific contraventions of SIS (even though there may be - I'd have to do some reading to be certain) but it would be the audit that would be the problem.
Question is: How does the auditor satisfy existence of the precious metals at year end? You would need to understand if the storage facility will provide the necessary documentation to register the gold in the SMSF name in a foreign jurisdiction (always a problem) and will they measure it at year end and should you insure the gold - and how will you do that overseas? Don't think the aTO would be a fan and therefore I would not recommend this course of action. Cheers, Ivan
In the past the fact that I had documentation regarding a safe deposit box plus annual fees debited for the box plus I had a record of when the gold/silver was purchased was sufficient evidence. Unless the auditor wants to arrange to meet me at the vault and physically see the bullion in place how would they know? Even then someone could "borrow" the bullion and place it in the safe deposit for the audit. Its a bit like you being at work and you are trying to sort your wife's credit card account over the phone and the numpty wants to speak to Ms non recourse. Any female will do provided she knows her date of birth and home address. The whole SMSF audit is a gross waste of resources. If you have the look at the now 500,000 or so funds the compliance is astounding and that is what the Cooper review showed. The retail and industry fund directors have been milking the super cow for decades while accusing SMSF trustees of dishonesty through the media, specifically the red rag fairfax press that includes the financial review. There is a total lack of common sense with regards to SMSF compliance. Its laughable that the auditors had to have special approval to audit super funds. When you look at the average amount of money involved around $900,000 for the average two member fund it is a pittance. Kind Regards non recourse
Hi Ivan, I'm wondering if you can help me understand the concerns in your post above a bit more: Specifically, I don't understand why if bullion was stored in an overseas safe deposit box, rented by the Trustees of the fund, and used solely for that purpose, why this would be an issue. Would the criteria for auditing the fund, as you posted on the PM SMSF ATO Complience thread not still apply?: It seems to me that we could easily show that the assets were under control of the Trustees for the stated purposes of the SMSF, as with any other holding of PMs within Australia. Their existence and valuation could also be proven using the same ways you suggest above for storage at a vault within Australia. So, I guess I'm specifically asking: - Is there any part of the super legislation (or a Taxation Ruling, etc) that specifically would now allow them to be held outside of Australia? - Do you have any other reasons for thinking 'The ATO would not be a fan'? - Is there anything else here that I'm missing?
SMSFs require an audit to be performed by an independent auditor. So, the trustees prepare a set of financial statements (perhaps with the help of an accountant) and these are then given to an independent auditor who makes sure everything in the financials is correct (this is one part of an SMSF audit). The auditor is bound by a set of auditing standards http://www.auasb.gov.au. You can read through all of these if you like but you will find yourself asleep in pretty much no time. In there under ASA 315 there is information about procedures for testing the financials statements to make sure they are free from error. Specifically they are around A118 - A125. These interact with other Standards and together define what auditors are required to do. In this case, the financial statements would contain an asset on the balance sheet (bullion stored overseas) and the auditor needs to test whether the balance of that account is correct. In this case, if I were the auditor I would be sceptical around the 'existence' assertion and would want some evidence to ensure the asset actually exists. Each auditor would actually want different things (it is somewhat subjective - and that is part of the difficulty). Personally, aside from physically inspecting it I don't think I could satisfy myself of its existence so if this asset forms a material part of the fund I may have to issue a qualified audit report. That is, the auditor must lodge paperwork with the ATO to say that he can not be certain the financial statements are free from material errors. The ATO then goes about it's business of investigation of your fund. At the end of the day, if everything is correct then I don't believe there will be any issues but the stress and hassle of that would probably outweigh the benefit. The other part of the audit is an audit of the funds compliance with legislation (SISA compliance). I believe this is where you are getting confused. There is probably nothing (and as I said before I would have to make sure) but there is probably nothing in SISA which states you can't store the bullion overseas. So, while the auditor may be able to say you are in compliance with SISA you may still get a qualified audit report because the auditor cannot satisfy themselves that the financial statements are free from material misstatement. Hope this helps.
