Can my SMSF invest in Pink Diamonds?

Pink Diamonds

Pink diamonds are an allowable investment in an SMSF, however there are important considerations when investing in any asset in an SMSF to make sure that the investment is compliant and does not contravene the legislation and is compliant for ATO and audit purposes.

The following must be considered when investing in any asset in an SMSF:

* Compliance with governing rules

* Ownership and separation of assets

* Valuation

* Storage (if applicable)

* Insurance (if applicable)

* Any Investment in an SMSF must satisfy the sole purpose test: that is, to provide retirement benefits to members.

Subject to complying with the Trust Deed, the Investment Strategy and the SIS Act an SMSF can invest in Collectables like Pink Diamonds.

Investment strategy and a fund’s governing rules

The ATO states “An SMSF’s investment strategy outlines its investment objectives and specifies the types of investments it can make. Before investing in [collectables like pink diamonds], SMSF trustees and members should consider the level of risk of the investment. Trustees and members may then review and if necessary, update their fund’s investment strategy to ensure the investment being considered is permitted.

Trustees and members also need to ensure that investments in [collectables like pink diamonds] are allowed under the SMSF’s deed.”

Valuation

A valuation will be required at the 30th of June of each year.

Storage & Insurance

There are 7 rules relating to collectables:

1.The asset must not be leased to a related party.

2.The asset must not be stored in a private residence of a related party.

3. A decision regarding asset storage must be documented and kept for 10 years.

4. The asset must be insured in the SMSF trustee’s name (insurance must be arranged within 7 days of acquisition)

5. The asset must not be used by a related party.

6. A transfer to a related party requires an independent valuation.

7. The diamonds must be identifiable and owned in the SMSF name.

As an SMSF expert we have set out the rules for holding pink diamonds in an SMSF. We are not recommending investing in pink diamonds and we are not licensed to give investment advice. Please do your own research, consider the risks and obtain investment advice from a licensed professional before proceeding. We are providing general information only. We have not taken into account your personal circumstances or objectives.

SMSF Accountant

Susan O’Connor

Susan O’Connor is an Accountant and SMSF expert with over 25 years of experience. Five years ago, she started her own successful accounting practice, specialising in SMSFs and all things super. She is passionate about teaching people about super and inspiring them to get invested in their own super. She has been awarded a Fellow of CPA’s, holds a B Bus and Diploma of Financial Planning, is a Registered Tax Agent, and holds an Australian Financial Services Licence to provide advice on SMSFs.

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