Issue
Can a trustee of a self managed superannuation fund (SMSF) acquire collectable banknotes and coins from a related party without breaching section 66 of the Superannuation Industry (Supervision) Act 1993 (SISA)?
Decision
No. A trustee of a SMSF cannot acquire collectable banknotes and coins from a related party without breaching section 66 of the SISA.
Facts
A related party of the SMSF owns collectable banknotes and coins.
The trustee of a SMSF wishes to acquire the collectable banknotes and coins from the related party.
Reasons for Decision
Section 66 of the SISA prohibits the acquisition of assets from related parties of regulated superannuation funds. These are some exceptions to this prohibition:
Listed securities can be transferred at market value
Business real property can be transferred at market value providing the superannuation fund has fewer than five members.
Subsection 66(5) of the SISA states that the term 'acquire an asset' does not include 'accept money.' The term 'money' is not defined in the SISA. Accordingly, the term 'money' will take its ordinary or common meaning.
The Macquarie Dictionary defines money as:
'coin or certificate (as banknotes etc.) generally accepted in payment of debts and current transactions.'
The distinction to be made between money used in its normal sense and money which has a value greater than its face value was considered by Darling J in Moss v Hancock (1899) 2 QB 111 at 116. Darling J stated at 116: 'The exchange of a coin for other coins is not conclusive proof that the exchanging was that of dealing with current coin on both sides. Many coins, which have not been formally withdrawn from currency, have a price far beyond their denominated value, by reason of their antiquity or rarity, or for their beauty of design or execution (although this last is perhaps to say again by reason of the coins being struck in another age and mint than ours). Money as currency, and not as medals, seems to me to have been well defined by Mr Walker in "Money, Trade, and Industry" as "that which passes freely from hand to hand throughout the community in final discharge of debts and full payment for commodities being accepted equally without reference to the character or credit of the person who offers it and without the intention of the person who receives it to consume it or apply it in any other use than to tender it to others in discharge of debts or payment for commodities.'
A similar approach was adopted in the Federal Court case Cusack v Federal Commissioner of Taxation [2002] FCA 1012; (2002) 2002 ATC 4676; (2002) ATR 443. In his decision Cooper J stated: 'Australian currency, whether notes or coin, including gold coin, when being used as legal tender to discharge monetary obligations is valued at its face value without regard to its intrinsic worth, if any, and without regard to any applicable issue price determined pursuant to s 14A of the Currency Act 1965 (Cth). There is thus only one value of gold coins when used as currency and that is the face value of the coin. The contention that there are 2 forms of Australian currency with different values is fallacious. Gold and other coins made of "noble" metal only have a value different to the face value of the coin when the coin is not being used as currency for any purpose and is regarded simply as a commodity.'
Accordingly, when banknotes and coins become collectable, they will have a market value which exceeds their face value. The collectable banknotes and coins become simply 'commodities' rather than money in its normal sense.
When a regulated superannuation fund acquires such collectable banknotes and coins, it will pay a higher price than their face value. As a result, the banknotes and coins would not be considered to be money under subsection 66(5) of the SISA and cannot be acquired from a related party as the acquisition does not meet any of the exceptions provided for by section 66 of the SISA.