What happens if the any of the "5 collectables rules" are contravened?

If a contravention occurs – then each individual trustee (and in the case of a corporate trustee, the company itself) is liable for an administrative penalty. A contravention will not endanger the compliance status of the fund if the contravention was unintentional but may give rise to a “speeding ticket penalty for the trustees”. Additionally, the ATO may issue a rectification direction. However, if the ATO forms the view that the contravention was intentional or reckless, then the ATO is entitled to review the compliance status of the fund.

It seems that the rules which are most likely to be unintentionally breached are the “storage decision” rule and the “insurance rule”.

The storage decision rule requires the trustee to document the decision or decisions relating to the storage of the collectables. The decision must be set out in a trustee resolution. Additionally, the decision should not only cover collectables already acquired but should also be drafted to cover collectables which are acquired in the future.

The SIS Regulations do not specify the content of the decision, however, it is likely that the decision should:

• acknowledge that the SIS Regulations impose specific rules relating to collectables (ie the 5 rules set out above);
• specify how the current (and any subsequently acquired collectables) are to be stored (eg in a commercial storage facilities);
• specify the insurer and policy covering theft or damage to the collectables (and any subsequently acquired collectables);
• specify the procedure to follow as to when a collectable is transferred or a new collectable is acquired -