Questions on Self Managed Super and Silver??!

J

jossilver123

New Member
Hi everyone!

I just had a few questions on SMSF and investing into silver. I dont have much in super but with the little I have I plan to put into silver (just think it has more upwards potential than gold).

And I was wondering...

1) What if I buy some silver with my super funds and dont insure it and it goes missing, ie. stolen or lost?? What happens then? Do I have to somehow get personal money to buy it back for the super account or just file missing silver report and full stop or...?

2) What if I buy a bar of silver with super funds and then I want it for my own personal use, can I 'buy it out' of the super fund? As in use my personal money to pay for it and then take it out of super for myself?

3) If I bought say a bunch of kookaburra 2010 coins say with some of my super and then bought some 1991 coins with my personal money, and then decided i wanted the 2010 ones for myself, and to put the 1991 ones into my super instead. Can I just swap them over?

4) What if I say buy a PAMP bar with my super now for (lets say) $1500 and keep the receipt (which just says 1kg PAMP on it, no serial numbers) and then the price of pamps goes to $750 each. So I get my pamp (lets say i chose to physically hold the silver) and sell it on SS, and say someone pays $1500 for it (unlikely, just an example). Then I use this money to buy two pamps, so now i have two instead of one. Lets assume i dont document any trade that occured on SS, so super fund does not know that i just traded one pamp for two. I now have an extra pamp which i can keep for myself (putting one back into super where it belongs). Is that right?

5) The above example can be with coins or anything. Say I buy coins with super, sell and make a profit (again, undocumented), keep the extra profit for my personal account, buy back the same coins i sold for a lower price and put them back into the super silver stores?



I dont know much about it so just have all these unanswered questions in my mind! ANY help would be appreciated!!

Thanks!
 
Excellent questions. I've been pondering the same sort of thinking lately... for obvious reasons.

Would love to hear from someone more knowledgeable than myself on this topic.
 
jossilver123 said:
Hi everyone!

I just had a few questions on SMSF and investing into silver. I dont have much in super but with the little I have I plan to put into silver (just think it has more upwards potential than gold).

And I was wondering...

1) What if I buy some silver with my super funds and dont insure it and it goes missing, ie. stolen or lost?? What happens then? Do I have to somehow get personal money to buy it back for the super account or just file missing silver report and full stop or...?

2) What if I buy a bar of silver with super funds and then I want it for my own personal use, can I 'buy it out' of the super fund? As in use my personal money to pay for it and then take it out of super for myself?

3) If I bought say a bunch of kookaburra 2010 coins say with some of my super and then bought some 1991 coins with my personal money, and then decided i wanted the 2010 ones for myself, and to put the 1991 ones into my super instead. Can I just swap them over?

4) What if I say buy a PAMP bar with my super now for (lets say) $1500 and keep the receipt (which just says 1kg PAMP on it, no serial numbers) and then the price of pamps goes to $750 each. So I get my pamp (lets say i chose to physically hold the silver) and sell it on SS, and say someone pays $1500 for it (unlikely, just an example). Then I use this money to buy two pamps, so now i have two instead of one. Lets assume i dont document any trade that occured on SS, so super fund does not know that i just traded one pamp for two. I now have an extra pamp which i can keep for myself (as super wouldnt know any better)! (putting one back into super where it belongs). Is that right?

5) The above example can be with coins or anything. Say I buy coins with super, sell and make a profit (again, undocumented), keep the extra profit for my personal account, buy back the same coins i sold for a lower price and put them back into the super silver stores?



I dont know much about it so just have all these unanswered questions in my mind! ANY help would be appreciated!!

Thanks!
Click to expand...


Point 1) Coins must be insured within 7 days of purchasing them or you will be in breach of the act. Bars don't need to be insured (but would probably be a good idea to do so IMHO). Either way I imagine you would need to speak to the police about the theft then lodge with the ATO. I wouldn't think that you would be personally liable for the loss, but you might be fined? Someone else will probably chime in here.

2) No, you can derive no personal gain from the trust until retirement and cannot transact with yourself (or family members, or even friends I think) as all transactions need to be at 'arms length'

3) Not sure that anyone auditing your fund would know the difference so that would be pretty hard to police I think

4 & 5) Both big no-no's (IANAL but could be considered fraud?) same as point two.

The above is only my understanding - obviously you should seek your own legal/accounting advice, but really all the things you are asking could get you in to a fair amount of hot water with the ATO...
 
WoW....had NO idea that it was 'wrong' to do so, as im a novice to the idea of SMSF's here and just curiously pondering the idea behind SMSF and what you can or can't do!!

Ok, so i now know to definately NOT do 4 & 5 if i decide to take the plunge!

Thanks for the input guys! If anyone else has any oppinions on the other points, please feel free to elaborate! :D
 
jossilver123 said:
Thanks for the input guys! If anyone else has any oppinions on the other points, please feel free to elaborate! :D
Click to expand...

Maybe the best way to think about your fund is that while it is your money it is not your money yet :D

You as the trustee should be managing the fund as if it was a separate entity with no current day benefits for you at all (I know, fun right... except for the occasional silvery fondle which you are not allow to enjoy!! :D )

Lots of reading / learning to do when you start out. I found this pretty helpful http://www.thesmsfreview.com.au/index.html (no affiliation).

Some relevant links for more fun:

ATO superfund site: http://www.ato.gov.au/content/00182491.htm?headline=Thinkingaboutaselfmanagedsuperfund=superfunds
Collectables and personal use assets - questions and answers: http://www.ato.gov.au/superfunds/PrintFriendly.aspx?ms=superfunds&doc=/content/00301181.htm
 
Thanks cowwws, some good info there. Continuing along the theme of not offering advice but only opinions...

1. Numismatic coins may need to be insured within 7 days and there is some discussion as to what makes a bullion coin into a numismatic coin. Bars of silver on the other hand do not fall into that category and it is down to the trustee to make sure that the investment is well protected. The trustee may well feel that insurance is not necessary and as long as they minute this decision then it should be OK.

If the trustee did not take precautions and the silver was lost then the trustee would be responsible for that loss, not sure what they could do about it though as long as you followed all the procedures and minuted all decisions rearding the storage. If you have a second trustee (like I have with eSuperfund, my wife) then that person will also be responsible for making the decision not to insure the silver. If that person decides they want to insure it then you have a problem.


2. You would have to sell it to someone and then buy it (or one like it) back off them (or someone else) and get receipts in all directions. You can't sell it to yourself. This is also something to be aware of if you do decide to buy collectible silver because you want it in your collection. When it comes time to sell the collection you can't sell it to yourself, you will have to liquidate your collection.

3. Silver is silver, but collectible silver is not. If you swapped one assest class for the same assest class then no one would know the difference unless you specifically itemise every item in your SMSF. If you swapped a 1oz silver bar for a 1oz proof coin someone might notice. However this would be against the 'single use' test. You can't get any personal benefit from the SMSF and this would count. If a tree swaps a coin in a forest and there is no auditor to see it, did it really commit a crime?

4. You are more than welcome to sell your SMSF silver on SS to a third party. However you need to document it and the money has to hit your SMSF account before you can spend it on more silver. You are more than welcome to then use the money to buy more silver and add that to your SMSF stack but you can't use the money from the SMSF to add to your own personal stack. Of course if you sell the silver for anything other than the same price you paid for it you will have made a captial gain or loss. I am pretty sure there will be tax to be paid to someone.

We are having an offline discussion as to whether you coupld swap some of your silver in the SMSF into gold, i.e swap 52 ounces of silver for 1 oz of Gold without incuring any problems or whether you would actually have to have several seperate transactions, each incuring a taxable event.

It is probably best to keep it simple, trying to exploit loop holes is for professional bankers only. the rest of us have to play by the rules and the simpler your transactions the easier you will find it.

You can get into a lot of trouble by not knowing the rules, you can get into even more for knowing the rules and trying to circumvent them. Saving in super is mandatory and full of rules and regulations. Saving in your own stack is not. I would just stick to silver bars in the SMSF and keep all the fun stuff in your personal collection where the government can't touch it.
 
Can someone point out in the legislation where "Coins must be insured within 7 days of purchasing them or you will be in breach of the act"?

I've got a few gold coins in my SMSF and have had an ATO compliance check (desk audit). They never even queried me about insurance, but did ask for a "declaration of trust".
 
Jislizard said:
Thanks cowwws, some good info there. Continuing along the theme of not offering advice but only opinions...
Click to expand...

Nicely done, way more eloquent than my sprawling, disjointed (as usual) post :-)
 
There are too many regulations and they keep changing, this is why I have gone with eSuperfund, I haven't got the time to keep current, it may restrict me in some areas of investment but it seems a good balance.

There is also some confusion over what is a numismatic coin and what is a bullion coin and both are treated differently. if bars weren't readily available I would look into it more thoroughly but as they are I am going on the path of least resistance.
 
willrocks said:
Can someone point out in the legislation where "Coins must be insured within 7 days of purchasing them or you will be in breach of the act"?
Click to expand...

Found in here: http://www.comlaw.gov.au/Details/F2011L01360/Explanatory Statement/Text

In particular:
Subregulation 13.18AA(5) specifies that each trustee of an SMSF commits an offence if the fund does not insure a section 62A item in the name of the fund within 7 days of acquisition of the item.
Click to expand...

What's a section 62A item, you ask?
Subregulation 13.18AA(1) specifies the assets that are taken to be collectables and personal use assets (section 62A items) and therefore to which regulation 13.18AA applies. These assets are: artwork (within the meaning of the Income Tax Assessment Act 1997 (ITAA97)); jewellery; antiques; artefacts; coins, medallions or bank notes; postage stamps or first day covers; rare folios, manuscripts or books; memorabilia; wine or spirits; motor vehicles; recreational boats; and memberships of sporting or social clubs.

Artwork is defined in subsection 995-1(1) of ITAA97 as: a painting, sculpture, drawing, engraving or photograph; a reproduction of such a thing; or property of a similar description or use. Coins and bank notes are collectables if their value exceeds their face value. Spirits includes, but is not limited to, whiskey, gin, vodka, tequila, brandy and rum.
Click to expand...

hth
 
So the Perth Mint Kookaburras and Koalas, both sold as bullion coins through the Bullion site and not sold as collectibles through the Perth mint Shop do not meet the requirement to be bullion coins as they have a face value of $1, and intrinsic value of $27 and a resale value of $34.

I think the rules was meant for proper coins such as the old pirate coins, with a face value of 8 reales and a value of several hundred dollars. Not modern coins mass produced. Until they sort it out I will go with bars!
 
Jislizard said:
So the Perth Mint Kookaburras and Koalas, both sold as bullion coins through the Bullion site and not sold as collectibles through the Perth mint Shop do not meet the requirement to be bullion coins as they have a face value of $1, and intrinsic value of $27 and a resale value of $34.
Click to expand...

That's my understanding (but I have been wrong before... a lot...)

Doesn't mean you can't have them in your fund though, just that you need to store them somewhere other than your house, etc and they need to be insured. FWIW, we just have all our fund's metal insured and stored somewhere safe...
 
Thanks cowwws and jislizard for your responses. That has been my general understanding of the SMSF requirements as well, although I wasn't aware that you could own bars (or kooks) without requiring insurance. I also thought that SMSF gold and silver had to be stored offsite (similar to not being able to hang your SMSF-owned Monet in the lounge room !!).

I have taken the approach of owning gold and silver personally, but then using my SMSF to purchase gold shares as a longer term leverage play ... but I may look further into the requirements for purchasing Au/Ag bars for the superfund, based on the previous comments.
 
Consider self insuring. Ie you undertake, in writing, to replace missing/stolen coins etc.
 
cowwws said:
Subregulation 13.18AA(1) specifies the assets that are taken to be collectables and personal use assets (section 62A items) and therefore to which regulation 13.18AA applies. These assets are: artwork (within the meaning of the Income Tax Assessment Act 1997 (ITAA97)); jewellery; antiques; artefacts; coins, medallions or bank notes; postage stamps or first day covers; rare folios, manuscripts or books; memorabilia; wine or spirits; motor vehicles; recreational boats; and memberships of sporting or social clubs.

Artwork is defined in subsection 995-1(1) of ITAA97 as: a painting, sculpture, drawing, engraving or photograph; a reproduction of such a thing; or property of a similar description or use. Coins and bank notes are collectables if their value exceeds their face value. Spirits includes, but is not limited to, whiskey, gin, vodka, tequila, brandy and rum.
Click to expand...
Click to expand...

See... what I got from this is that I can store my super in Whiskey. :D
 
BrickInTheWall said:
Thanks cowwws and jislizard for your responses. That has been my general understanding of the SMSF requirements as well, although I wasn't aware that you could own bars (or kooks) without requiring insurance. I also thought that SMSF gold and silver had to be stored offsite (similar to not being able to hang your SMSF-owned Monet in the lounge room !!).
Click to expand...

Art can be appreciated so if it was in your home you might just do that,it would serve two purposes, a gold coin could be admired if you weren't properly supervised so that would serve two purposes as well, but a lump of gold?!? What sort of wierdo would get any pleasure out of looking at that, therefore it only serves one purpose, investment. Which you can store at home without the temptation to take a peek at it. It saves paying for a bank deposit box and it means that it will always be close to hand. You will have to have it allocated though so if you have your own stack there would need to be a clear distinction between the two stacks.

Insurance is a security risk in my ill-informed mind, if I tell a third party that I have $X,000 and that it is stored in a safe in my home, which is not protected by a burgular alarm then automatically I have divulged sensitive information and as a trustee I am not happy to give out that sort of information to a third party. As long as I can make a case for not insuring the goods and my case doesn't not sound too much like a rant then I am hoping that it would be acceptable. Collectibles do require insurance as indicated above but can you insure other assets, like shares or a term deposit?

For anyone who can get along to a Super Stashers' Meeting I would really recommend it but there are also dedicated SMSF forums up at www.superstashers.com . It is Australian, very friendly, skewed a bit towards metals and you will recognise a few people from this forum.
 
Hey, I love admiring my lumps of gold and silver !! That is why I have a personal stash, so I can do what I like, without any questions being asked by the PTB, ATO , govt, etc.

However, with a SMSF, there are so many rules and regulations that have to be complied with, otherwise there is the risk of a hefty fine for a breach ... and just when you understand a rule, it gets changed !! I believe the SMSF is made difficult on purpose, so as to put people off ... because the PTB, banks, funds industry, etc don't want to miss out on their fees ... or worse yet, to allow us lumpkins to actually become independent.
 
You must log in or register to reply here.
Back
Top