How to Invest in Gold and Silver in a SMSF
You can buy gold and silver in your SMSF, but note that you are likely to pay a premium as these assets are classed as collectibles.
That said, this does not stop people from allocating a portion to their super. In fact, it's a very popular option.
Before you add a precious metals allocation to your SMSF, here's what you need to understand.
Precious Metal Types You Can Allocate in your SMSF
You are allowed to add precious metals to your SMSF, but you can only choose specific investment types. SMSF bullion rules mean you’re limited in some ways, meaning you can’t just add any items or store them where you want.
Gold & Silver Coins
Fortunately, it’s okay to add conventional gold and silver coins to your SMSF if done correctly. These are widely recognised and part of the scheme.
SMSF gold investment coins come in various types: sovereigns and 1-ounce coins. These get their value from their weight in gold.
Silver coins usually come in 1-ounce versions (and not smaller sovereigns). These include the Australian Kookaburra and the American Silver Eagle.
Which combination of these coins you include in your SMSF is up to you. Both operate under similar rules. However, you may want to overweight silver if you think its price will go up faster than gold’s and vice versa.
Also note that decorative gold and silver coins are classed as collectibles and are therefore subject to more strict rules than normal bullion.
Gold & Silver Bullion
Bullion is another option. This way of adding gold and silver in SMSF accounts lets you add more, though items may be less fungible.
Gold bars come in various sizes, including 1 ounce, 10 ounces, and 1 kilo. These bars must meet purity standards set by the Australian government (i.e. 99.99% pure to qualify as bullion). Bars in 20g and 50g are also available.
SMSF silver bullion investment options are similar. These come in the same sizes and must achieve a purity of 99.9% to qualify.
Financial institutions opt for higher purities because these metals only have monetary value. While lower purities are common in jewellery to add strength, this is not the case for investment-grade precious metals.
Maintaining purity standards is also safer for investors like you. These make it less likely that anyone will adulterate the bullion, and you can work out its weight from its size (to determine any interference).
Gold & Silver ETFs
A final SMSF option is to buy gold and silver ETFs. These ETFs track the price of gold and silver in the spot market, eliminating the need to hold any metal.
ETFs are “Exchange-Traded Funds.” The issuer collects gold or silver and then trades ETF paper against their holdings. The more paper people buy, the more investable metal the ETF manager adds to its vault, allowing it to redeem the metals if required.
Some investors prefer ETFs because the government treats them as a standard investment, not collectibles. As such, they don’t have to conform to the standards physical bullion does (though they should still meet regulatory approval).
You can find gold and silver ETFs on most investment platforms. Some are in Australia while others are in the US, but trade in AUD.
Rules Set by the ATO
SMSF precious metals ATO rules can be complex. Because of this, it’s worth reading through them before you jump in and start making large investments.
The first regulation is “no personal use.” This rule means you can’t use or display it in any way if you want to include it in your SMSF. You can only use it for investment purposes.
The second rule is to make “arm’s length transactions.” This regulation means you must buy and sell gold through registered dealers and market rates to avoid conflicts of interest.
Secure Storage
Because of these rules, you must store physical gold and silver at an ATO-approved facility. You can’t keep precious metals at home or your company's premises.
Most people use vaults, but any approved depository should meet the requirements.
Insurance
You also need to insure your gold and silver against theft. These policies protect you in the event you lose your investment.
Ownership Proof
Ownership proof is also something you’ll need to consider. Your gold or silver SMSF should have clear documentation showing you own the physical metals (and that they are authentic).
This same rule applies to ETFs. Your brokerage should have documentation showing you own them.
Regular Market Valuations
Finally, ATO demands that you value the gold and silver in your SMSF annually. Therefore, you will need to get an updated valuation based on the spot price of the gold and silver in your account.