Investing in Precious Metals

We’ve noticed many SMSF trustees are making the decision to invest in Precious Metals. We’re going to explain how to do it in a compliant manner.

The first item to ensure is that the asset is acquired in the name of the super fund, not in your personal name. A copy of the tax invoice for the acquisition must be supplied to us as supporting evidence.

Next we need to consider the annual fund audit. Gathering sufficient audit evidence to support existence, where bullion is not a collectable or personal use asset by definition, is clearly simpler when it is stored in an independent specialist storage facility than when stored at the members home. 

For instance

If stored in an independent storage facility:

An Annual holding statement at year end that also states the weight of the bullion would usually be available.

The Audit guidance provides that the auditor may physically inspect assets or examine documentation to support their existence at year end.  However, it’s not always practical to conduct a physical inspection for bullion in the first instance. 

It is more common to consider other sources of evidencing first, and then move to the conduct of a physical inspection of bullion, when these are not able to be provided.

For instance

If stored at home:

A photograph of the bullion including obvious serial number, next to a newspaper or a magazine that shows date as at 30 June, or a timed photograph with location, may support existence at year end, in conjunction with; a detailed investment register that includes a note of the serial number/s of each bullion.

It is also noted that, preferably, the bullion should be insured separately from the home and contents policy, and that such a policy also indirectly supports existence.

Where bullion represents less than 5% of the fund and the above existence evidence is not able to be provided, we suggest the Trustee/s provide a written declaration detailing the bullion held by the fund, and confirming bullion was on hand during the period and at year end i.e. attest to the existence of the bullion at year end. In the instance, where we rely on this declaration by the trustee to support existence, this should be communicated to the trustees in the audit completion letter.

Auditors may then request that the Trustee/s provide some evidence to support the existence of the bullion for the audit of the fund for the following financial year.

Where the above evidence is not able to be provided to support existence, and the bullion is greater than 5% of the fund, Part A of the audit report will include a limitation of scope in respect of the evidencing of the existence of this asset.

An example of this is noted as follows:

The fund holds [Bullion] totalling $$$$$$$ as at 30/06/XXXX. We acknowledge receipt of the trustee’s declaration confirming the existence of the [Bullion] as at 30/06/XXXX.

However, we have been unable to obtain sufficient appropriate audit evidence to support the existence of the [Bullion] as at 30/06/XXXX. As a result, Part A of our audit opinion is qualified in respect of this.

As many of you are aware, we work with external Auditors and it’s important to ensure you are aware of your obligation with regard to satisfying audits for Bullion.

If you’d like to discuss further, please don’t hesitate to contact Karen Dezdjek or Olivia Long.

The information in this article contains general advice and is provided by ExpertSuper™ Pty Ltd as an authorised representative of Primestock Securities Ltd AFSL 239180. That advice has been prepared without taking your personal objectives, financial situation or needs into account. Before acting on this general advice, you should consider the appropriateness of it having regard to your personal objectives, financial situation and needs. You should obtain and read the Product Disclosure Statement (PDS) before making any decision to acquire any financial product referred to in this article. Please refer to the FSG (available here) for contact information and information about remuneration and associations with product issuers.This information should not be relied upon as a substitute for professional advice, and we encourage you to seek specific advice from your professional adviser before making a decision on the matters discussed in this article. Information in this article is current at the date of this article (12 November 2020) and we have no obligation to update or revise it as a result of any change in events, circumstances or conditions upon which it is based.

By | 2021-03-04T21:30:14+00:00 March 4th, 2021|SMSF|0 Comments