Review your fund’s strategy

Executive Manager, SMSF Technical & Private Wealth, SuperConcepts
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The ATO’s recent mail out to SMSF trustees who have high concentrations in one asset, or a single asset class, has stirred up wide discussion on SMSF investment strategies. The ATO’s stance provides a wakeup call to all trustees to review their fund’s current strategy, including justification of their decisions, before the next fund audit.

When speaking to many SMSF trustees I find it’s clear they have some great ideas about the fund’s investments and the reasons for what is happening.  However, the problem is that all the information is in their head and they’ve failed to put it down in writing.  I often find that trustees have completed a standard investment strategy template which neglects to consider the fund’s specific circumstances, but that’s what the ATO is really after.

To comply with the investment strategy requirements of the SIS legislation I consider the trustees’ need to address the fund’s liquidity and the cash-flow needs, risks involved with making, holding and realising investments, discharging liabilities and the members’ insurance needs.  If your SMSF does not cover these requirements and justify the actions of the trustees, then I think you are faced with one of two options:

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