SMSFs: The rule book on investing in cars, wine or diamonds

Fred runs a diamond retail and wholesale business, specialising in pink diamonds. Having expertise in this field, Fred wishes to invest in diamonds via his SMSF.

Natural diamonds, including pink diamonds, held in loose form are not considered collectable or personal use assets under super law, and thus do not have specific storage and insurance requirements.

Say your SMSF owns a painting, it cannot be stored or hung in your home or the home of a related party, but it can be leased out to a gallery provided the gallery is not owned by a related party and the lease is on arm’s length terms. Given the stringent requirements and additional documentation for these assets, SMSF trustees investing in them are generally those who have particular expertise in the area and are confident investing members’ retirement savings in assets they know well.

So, while Fred’s SMSF may invest in diamonds, it cannot buy them from his business, nor can they be contributed to the fund. The trustee will need to acquire the diamonds from a non-related third party on commercial terms.

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