The ATO released guidance to SMSF Trustees on Investment Strategies on the 19/02/20.

The ATO has confirmed that “Your investment strategy is your plan for making, holding and realising assets consistent with your investment goals and should explain how your investments meet your retirement objectives.” They have also confirmed that “when formulating your investment strategy, it is not a valid approach to merely specify investment ranges of 0 to 100% for each class of investment.”

A few weeks ago, Jes and I attended the SMSF Association National Conference where it was apparent that one area of increased ATO Audit scrutiny is in relation to the ATO’s diversification review. Australia’s super system is now the fourth largest pool of retirement savings in the world and SMSFs comprise nearly one third of the $2.7 trillion retirement pool. The size of the pool means scrutiny of SMSF trustee activities will only increase.

One area of scrutiny will be for the Investment Strategy for your SMSF, which should be specific to your Fund. If you do not have an Investment Strategy or have invested in a way that contravenes your Investment Strategy, the ATO can apply a penalty of $4,200 (to each individual trustee) or jointly and severally to the directors of a corporate trustee.  Dana Fleming, ATO Assistant Commissioner, said that in the 2018/2019 year $3.1 million in net administration penalties were raised by the ATO up from $1.7 million in the prior financial year.  For the 2019/2020 year to date, the ATO has already applied $3.3 million in net administration penalties.  Fleming went on to state that the Investment Strategy guidance released this month, is one step on the ATO’s journey to ensuring improved effectiveness and transparency for SMSFs.

At the Conference we also heard from James O’Halloran, ATO Deputy Commissioner for Superannuation and Employer Obligations, who asked SMSF Trustees “stop and consider your Investment Strategy in a way that satisfies your own due diligence, as well as your Auditor’s.”

We have always said that a robust Investment Strategy is the first step in ensuring that your SMSF can deliver your superannuation objectives. It should document the big picture overview of what you are trying to achieve with your super, how you as Trustee will achieve the objectives and the risks you may need to take to achieve your objectives.

If you need assistance to review or write your SMSF’s Investment Strategy – please contact our licenced Wealth Managers.  Kylie and Jes are both accredited SMSF Advisers and SMSF Specialist Advisers.

To review the ATO’s guidance on SMSF Investment Strategies in full, please click on the link:

Over the coming weeks we will release more insights and highlights from the various speakers at the SMSF National Conference.

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