A lack of explicit guidance regarding the inclusion of life insurance under an SMSF investment strategy is no reason to downplay its presence in the strategy, according to an SMSF accountant and adviser, who suggests making it more explicit for audit purposes.
Susan O’Connor Accounting principal Susan O’Connor said the ATO’s guidance regarding investment strategies only states consideration must be given to holding life insurance within an SMSF, but more could be done to meet that requirement.
“SMSF members don’t have to have insurance via the fund and the ATO only says you have to consider insurance, so as long as the investment strategy states you have considered insurance, you can say it’s been considered for all members,” O’Connor said during a recent presentation held by The Auditors Institute.
“However, you should do it individually for each member. So, for member A state you have considered insurance and decided not to take out any and do the same for member B and so on, and then document that you’ve considered it.”
She noted while there was no specific ATO document requiring the documentation of insurance, decision-making that explicit would be consistent with a more detailed investment strategy.
“It would be better obviously to have an explicit decision and a better investment strategy would state the decision that had been made,” she said.
“A very generic strategy is going to say insurance has been considered and you may be dealing with someone who’s got a very generic investment strategy overall and may need a much better one.”
She added addressing the generic nature of an insurance decision avoids a “tick-and-flick” approach and can lead to other discussions about improving the strategy.
“Do you want to see the buzzwords and just tick, tick, tick or are we aiming for a higher standard than that?” she said.
“The ATO’s focus on investment strategies in 2019 meant there was a lot of good outcomes for our clients and we were able to discuss investment strategies with them and what they were doing.
“I would use it as an education opportunity to perhaps change their way of thinking because what is easiest is not always what is best.”
