Auditing, Investments

Investment strategy acknowledgement can be simple

SMSF investment strategy documentation

Simple documentation may be enough for auditors to determine SMSF trustees have fulfilled their obligations with regard to a fund’s investment strategy.

The ATO has confirmed simple documentation can constitute the sufficient evidence auditors require to satisfy themselves trustees have complied with their obligations regarding the SMSF investment strategy as determined in the Superannuation Industry (Supervision) (SIS) Act.

“[Obtaining sufficient evidence] doesn’t mean you need a full statement of advice, it doesn’t mean you need War and Peace, but it does need more than lip service to the regulations,” ATO SMSF segment assistant commissioner Dana Fleming told delegates at the Chartered Accountants Australia and New Zealand National SMSF Conference 2019 yesterday in Sydney.

“So saying ‘I have considered the items in regulation 4.09B [of the SIS Act]’ is not sufficient.”

Fleming stipulated auditors need to see a demonstration from trustees that all elements of regulation 4.09B have been taken into account, including the personal circumstances of the fund.

She pointed out auditors and trustees needed to understand that adhering to this process properly was not only about compliance, but also served to protect both parties if something goes wrong with the investments in the SMSF.

“So a simple trustee minute, we’re not looking for War and Peace, or some other kind of addendum to the investment strategy that acknowledges, for example, with relation to the letter we have recently sent out, [stating I] ‘have decided to invest primarily my super in a single asset and that asset is property because I believe it has long-term growth and is suitable for my retirement objectives’ would be sufficient,” she noted.

In addition, she revealed the ATO’s role with regard to investment strategy scrutiny as well as the other acknowledgement the regulator wanted from the exercise.

“The ATO has no right to say if that’s a good decision or a bad decision. That is wholly [for the trustee] to decide for themselves in conjunction with a financial adviser if they have one,” she said.

“But we are looking for an acknowledgement of risk.”

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