Auditing, Investments

Investment strategy percentages not needed

SMSF investment strategies portfolio

Investment strategies don't need to specify the percentage of an SMSF portfolio that will be allocated to a certain asset class.

A specialist SMSF auditor has stipulated fund investment strategies need only reference the type of assets to which contributions will be allocated and not the actual portion of the portfolio that will be assigned to the said asset class.

ASF Audits executive manager technical services Shelley Banton in fact recommended the percentage of an SMSF portfolio that will be allocated to a particular asset class should be omitted from investment strategies if trustees want the audit process to be completed in a timelier manner.

“That’s going to get your audits through a lot quicker because once the percentages are in there we have to review it and if it’s outside of those ranges we have to ask why. [In those circumstances] we have to ask for either a new investment strategy or ask why that should happen,” Banton told participants in the latest webinar hosted by Accurium.

However she stressed if an asset is material on the SMSF balance sheet then it must be listed in the investment strategy.

“So we don’t want to see an investment strategy with just cash and other when in fact there is cash, property, and shares, and all of those assets are material in the fund. They all need to be listed separately in the investment strategy,” Banton explained.

She added if the investment strategy does specify the actual proportion of the SMSF portfolio that is supposed to be allocated to a particular asset class, and the fund balance sheet does not support this evidentially, trustees can alert the auditor to this anomaly and the situation will be classified as a contravention as long as it is only a short-term occurrence.

“[For example] if the fund is cashed up because it is about to purchase some property you can let the auditor know that and that can be a short-term answer but it can’t be used as a get out of jail free card response,” Banton said.

“There must be a good reason as to why that is the case and it needs to be short-term only.”

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