Gold and Silver Bullion Investments in your SMSF
When an SMSF is considering what other investment options they might have other than what they currently have, they may be considering or already hold Gold Bullion or Silver Bullion, Platinum Bullion or even Palladium Bullion. Options include Coins, Minted Bars and Cast Bars.
How it works:
Trustees approach a mint (the perth mint for example) or private dealer (a quick google search has shown me ABC Bullion | Ainslie Bullion | Jaggards | KJC | Gold Bullion Australia) – but do some research.
Trustees then acquire the type and quantity of bullion they would like
Trustees then work out how they would like to store it. You see, you would think once you buy an asset with a physical form like bullion, that you just go and pop it in the back of your car and bring it home – but you should strongly consider more intelligent options because you need to think of other stakeholders in your superannuation fund.
The SMSF Auditor typically prefer that these are stored in the vaults from the mint or private dealer in which you acquire bullion from. Not only are they safer there, they are insured. They are also capable of providing solid audit evidence each year at 30 june in the form of a holding statement. This is strong evidence for an auditor. They show existence, they show valuation. Its good audit practice.
However, having said the above, some trustees don’t feel the cost of storage is worth the security or any other reason decide that storage at a secure safe at home is the better option. I would like to think their insurance knows about this and that adequate cover is in place.
Of course strong evidence of photos at year end perhaps next to the days paper might show existence and valuation at that point in time, along with the acquisition invoices and a declaration stating and laying out everything the photos are showing may be an acceptable option too.
Typical bullion options might take the form of Coins depicting the Australian Kangaroo or American Eagle which carry premiums but are supposedly legal tender. Do your homework - if the supplier is claiming that the bullion is worth MORE than its face value if melted down, it may be considered a collectable and if it is considered a collectable – then we run into greater compliance requirements (refer to SIS Reg 13.18AA) in line with how a fund must deal with items such as artwork, jewellery, wine, motor vehicles, Memorabilia.
Bullion Bars – the most widely known and common bullion option has a stamped weight and purity on each bar
Rounds are another less popular option which appear to be bullion coins but are not considered legal tender.
Typical sizes and weights include 1g - 1kg or more. Ounces are also commonly used as a measurement for them.
Typically an invoice would look like this:
Unit description: Units acquired x Unit price = Total price
Remember, under SISA s66 you cannot legally acquire bullion of any sort from yourself personally.
Other considerations as a trustee are
Investment strategy – Does it allow it, and if it does are there restrictions or upper or lower limits for this asset class.
The funds trust deed – does the trust deed express any restriction on this investment.
Disclaimer: Do not rely on the above as investment advice as none has been provided above.