SMSF Property Insurance
Protect your SMSF property, artworks or collectable assets from theft, damage or destruction
If you hold or are planning to invest in property, artworks or collectible assets through your SMSF, you need to pay close attention to your insurance arrangements to ensure the fund remains compliant and you satisfy your obligations as a trustee.
Protecting property and high-value assets inside an SMSF is not optional but a part of a trustee’s legal obligation under Australian superannuation law. If your SMSF invests in residential property, commercial property, artworks, collectables or other insured assets, the fund must hold appropriate insurance in the name of the SMSF to maintain compliance, protect value and avoid penalties.
Find out everything you need to know about SMSF property insurance, including ATO expectations, when cover is compulsory, how to structure multiple asset classes under one SMSF, and what compliance traps trustees are often unaware of.
Why Insurance is Mandatory for SMSF-owned Property & Assets
Whenever an SMSF acquires an asset, whether it’s physical property, investment real estate, a collectible item, a vehicle, jewellery or artwork, that asset is at risk of:
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Fire
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Flood or storm damage
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Theft
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Criminal damage
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Accidental destruction
As trustee, you have a statutory legal obligation to take reasonable steps to protect the fund’s assets.
SMSF borrowing almost always triggers mandatory insurance
If your fund has borrowed money to acquire property (for example via an LRBA structure), your lender will almost certainly require that the property is insured as a condition of funding.
Even where the purchase is made directly from SMSF cash reserves (no borrowing), trustees still require insurance to remain compliant with superannuation law.
If your SMSF owns residential or commercial property that is leased or rented out, you must also hold landlord insurance in the name of the SMSF to protect the fund from financial losses and liability claims.
Self-insurance is not allowed for SMSFs
Trustees cannot take the position that “the fund will carry the risk itself”.
Self-insurance (where you carry the risk of loss with no insurance) is not an option for SMSFs. As a Trustee, you are required by the ATO to take out insurance on all property and assets of the fund, even where they may be covered by an external policy.
For example, if you lease artworks to a gallery, you will need your own insurance despite any arrangements the gallery might have in place. Purchasing or holding an uninsured asset is a breach of your duties as Trustee, so you need to investigate and lock in SMSF property insurance arrangements before you commit to purchase a property, artworks, collectables or vehicles.
If you are unable to find an underwriter to insure an existing asset, you will be required to sell it.
Property Insurance Structure for SMSFs
Your SMSF may require separate policies for different asset classes, but you do not need individual policies for every single item.
For example:
If the SMSF owns a collection of artworks, antiques or jewellery, you can usually obtain a blanket policy for those categories held together.
However:
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buildings (residential or commercial)
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vehicles
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specific high-value single assets
often require their own separate policies.
Your SMSF insurance policies must cover only assets held by the fund, and may not include any items you own personally or through your business. Similarly, you are not permitted to insure assets of the fund under your personal or business insurance policies.
All policies must be held in the name of the SMSF, and premiums must be paid from SMSF funds, not personal money.
You need to ensure the fund has sufficient cash to pay your insurance premiums, as your policy will lapse if you fail to keep up with payments, leaving the SMSF’s property uninsured and the Trustees in breach of the ATO requirements.
Residential Property & Landlords Insurance
If your SMSF owns residential real estate:
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you need a standard property insurance policy for fire / damage / theft
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if it is leased or rented — you also need landlord insurance
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the policy must be held by the trustee on behalf of the SMSF
The policy is similar to a regular residential property or landlords insurance policy, but needs to be held in the name of the trustee of the SMSF on behalf of the fund. You can get an instant online quote for the residential property by clicking the quote button directly below.
Commercial Real Estate & Landlords Insurance
Commercial property insurance differs from residential insurance as the insurer needs to cover business-use risk.
In Australia, this usually falls under Business Property and Asset Insurance.
This type of cover is essential to protect the SMSF from liability claims or losses associated with tenancies, public liability exposures and fit-out related risks.
You can find out more about Business Property and Asset Insurance and get an instant quote online here.
Art Works and Collectables Insurance
Since 1 July 2016, regulations for artwork and collectable ownership inside SMSFs have been significantly tightened.
New SMSF regulations require trustees to hold insurance policies to cover artworks and collectables in the name of the fund, even if this results in duplication of insurance.
Often artworks are leased to a third party who will have insurance covering the art, while an art dealer or brokerage may also have insurance over the art. This may mean there are three separate insurance polices running in duplicate. However, this does not exempt the trustee’s requirements to hold insurance in the name of the fund, and may lead to penalties for non-compliance.
Key points all trustees must understand:
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the insurance must be in the name of the fund
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this must be done within 7 days of acquisition
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external coverage (gallery, art dealer, lender) does not replace this requirement
Even if a gallery has insurance on artwork you’ve leased to them, this does not remove the trustee’s obligation to insure under the SMSF’s name.
Penalties
If the art or collectable is not insured correctly, each trustee commits a strict liability offence under Regulation 13.188AA(5) of the SIS Regulations.
Penalty guidance: approx $1,700 per artwork, per trustee.
Under the regulations, trustees are expected to insure artworks and collectables in the name of the fund within 7 days of acquisition, with penalties for non-compliance currently around $1700 for each piece of art, and each trustee.
Ignorance is not a defence — the regulations explicitly state trustees are expected to be familiar with the rules. So, unfortunately, claiming you were unaware of the rules will be no excuse.
