Investing in gold
I am often asked by self managed superannuation fund (SMSF) members if their superannuation fund can invest in gold?
When an SMSF member is considering investing in gold or other precious metals, they need to consider whether the investment could fall within the definition of collectables and personal use assets.
A gold investment could be in gold bullion, gold coins, or gold ingots.
Gold bullion is a recognised weight and fineness of gold that can be purchased for the current price of gold, plus the small percentage costs incurred in refining, fabricating, and shipping the bullion to the purchaser. The word “bullion” means a refined and stamped weight of precious metal. Most people think of it as large gold bricks or gold bars.
Gold ingots are also sometimes referred to as gold bars, but they are formed differently than the minted bars. With ingots the weight contained can vary as these bars are poured instead of stamped. They are usually thicker than the stamped bars.
Gold coins can be found in two different types. Those valued for the bullion amount (i.e. bullion coins) or those with historical value which are often rare, called numismatic coins.
- Bullion coins are valued solely on the precious metal they contain and the demand for the metal. Some bullion products may carry a significantly higher dealer mark-up due to their popularity and higher investor interest. Interest in bullion coins is generally driven by the desire to speculate in gold, and to invest in the precious metal over the long term as a store of wealth.
- Numismatic coins may often have a value greater than that of the precious metals the coins contain. Numismatic coins may also have extra costs embedded into their price due to their rarity, grade, and demand. These coins are mainly for numismatists. A numismatist is someone who does more than simply collect coins. They actively study currency, including coins and paper money, or related items such as tokens and medals. They are particularly interested in the coin’s historical, social and artistic significance. Many people collect these coins due to their strong desire to own something rare and intrinsically valuable with an aesthetically pleasing design that reflects a personal interest. They are mainly purchased by collectors and not investors.
Collectables and personal use assets are things such as artworks, jewellery, vehicles, boats, and wine. They include coins, medallions and bank notes. The Australian Taxation Office has stated that if coins or banknotes have a value which exceeds their face value, they are treated as collectables. Numismatic coins are treated as collectables. Bullion coins are collectables if their value exceeds their face value and they are traded at a price above the spot price of their metal content. However, gold bullion or gold ingots are not treated as collectables or personal use assets.
In essence, an SMSF can invest in gold as long as it is not acquired from a related party. The key issues to consider when an SMSF buys gold bullion bars or gold ingots are:
- The storage and protection of the gold assets. It is recommended the gold assets are stored in a secure place such as a dedicated vault service and not at the SMSF member’s home.
- Insured. The gold should be insured in the name of the SMSF.
- The maintenance of the purchase and sales documents of the gold investments.
The Tax Office has issued tighter guidelines in July 2016 for SMSFs investing in collectables and personal use assets. Therefore, where gold falls under the definition of collectables and personal use assets, then it cannot be leased to, used by, stored at, or displayed in a private residence of a related party. For more details on collectable and personal use assets, please refer to the following link: