People invest in gold for various reasons, it could be to diversify their portfolio, or hedge against the next economic meltdown. Basically, people who invest in gold are simply trying to ensure that their money is safe and that it will generate better returns in the future. This is the same reasons that people put their money in Self-Managed Superannuation Fund (SMSF). A common question that people in SMSF ask is: Can they invest in gold? The short answer is: Yes but there are rules that you need to be aware of.
Why would want SMSF Gold Bullion?
Your Self-Managed Superannuation Fund can be the help you create wealth for your retirement. A defensive asset like gold that is positively affected by weakening stock markets or a general weakening of the economy is important for balancing out your portfolio. So when a crisis like the last global financial crisis of 2008 or the current COVID-19 the price of assets like gold goes up.
Can you use your SMSF to Invest in Gold?
Your SMSF can be used to invest in different types of gold but there are rules for holding such an investment. These rules may result in certain kinds of gold investments being prohibitive as far as costs are concerned.
Gold Coins
Gold coins whether they are bullion or numismatic coins are all defined as collectables. They fall under rules that would make them more costly. To invest in them you need to insure them, ensure that they are safely stored by in independent storage facility and there are regular audits required.
Gold Bullion
When we use the term bullion we usually have gold bars in mind. Gold bullion bars aren’t defined as collectors’ items and have different but simplified rules. So, SMSF gold bullion seems ideal. When it comes to gold bullion bars, the SMSF fund trustees have to make the following critical decisions:
Where to store the bullion bars
The trustees of SMSFs are obligated to ensure that the gold bullion bars are stored in a secure place. An independent vault supplier is ideal but if there is a secure safe at a trustee’s residence, the bullion bars can be stored there.
Should you Insure the bullion?
The decision to insure bullion gold bars lies with the SMSF trustees. They can insure the gold bars against theft, or whatever they seem appropriate. However, the insurance must be taken out in the SMSF’s name and not under some personal insurance policy like home-content policy.
Auditing gold bullion
Auditing gold bullion is different from auditing other financial products like bank accounts, stocks and bonds, shares, bank accounts etc. To audit these, one simply has to check with a bank or a broker. The auditor of a Self-Managed Superannuation Fund will primarily have to confirm that the gold exists and that it is valued appropriately. The auditor will require a declaration signed by all the Self-Managed Superannuation Fund Trustees that confirms the existence and amount of the Bullion.
The auditor will also need to see copies of receipts and invoices with details of the size, quality and quantity of the bullion.
The bottom line is that gold bullion can be used as an investment vehicle in an SMSF. You only need to be aware of the rules and follow them to achieve a better portfolio return.
