Is your SMSF investment strategy up to date? - MGD
1 October 2019

Andrew Albury

Director - Wealth

The Australian Taxation Office (ATO) has recently issued notices to close to 18,000 SMSFs identified as holding 90% or more of their funds in a single asset or asset class, with the ATO underlining that a significant decline in that asset class could jeopardise the Fund’s ability to meet its investment objectives. The move comes as the ATO renews its focus on SMSF investment strategy requirements, specifically diversification and liquidity risks.


The ATO’s concern

The ATO is concerned that SMSF Trustees may not have considered the risk, return, diversification and liquidity of the Fund’s underlying investments. Specifically, the ATO is concerned Trustees may not be meeting their investment obligations as set out in superannuation law and are exposing their Fund to significant risk.

With this in mind, the ATO is reminding Trustees of their obligations to have a formal investment strategy in place and the ongoing obligation to ensure that the investment strategy remains appropriate over time. In particular, the ATO is suggesting that Trustees clearly document the reasoning behind their Fund’s investment decisions.

This documentation is to be disclosed at the next Fund audit in order to confirm that there is both a genuine investment strategy in place and that the actions of the Trustees are consistent with this strategy.


What do you need to do?

This should serve as a call to action for Trustees to review their existing investment strategy to ensure:

• There is evidence the Trustee has considered the risk, return, diversification and liquidity of the Fund’s underlying investments;
• The investment strategy is in line with the Fund’s objectives; and
• The investment strategy has been appropriately documented.

If your Fund’s investment strategy does not tick the above boxes, then the strategy will need to be amended and updated where necessary to ensure compliance with current legislation.

If you have any questions or would appreciate a fresh perspective on your SMSF investment strategy to ensure it is in line with the ATO’s requirements, we are here to help. As specialists in this area, we can assist you in reviewing, amending and documenting your Fund’s investment strategy to ensure it remains compliant and on track towards meeting your fund’s objectives. Please get in touch if you’d like further information.

Disclaimer: This article contains general information only and is not intended to constitute financial product advice. Any information provided or conclusions made, whether express or implied, do not take into account the investment objectives, financial situation and particular needs of an investor. It should not be relied upon as a substitute for professional advice.