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Asset listing a strategy percentage alternative

Assets list investment strategy

A list of assets by type and monetary worth instead of by percentages is allowed in an SMSF investment strategy despite the ATO’s focus on the latter.

SMSF trustees can use a list of current assets rather than allocation percentages as proof of having a clearly articulated investment strategy, as per the ATO’s requirement to do so, provided they can demonstrate those items are fit for purpose, an SMSF specialist has said.

SmarterSMSF chief executive Aaron Dunn said, while the initial focus of the ATO investment strategy letters sent to 17,700 funds in September 2019 was to prevent the use of broad range asset class percentages to document the SMSF’s investment strategy, funds are not prevented from holding limited assets, nor reporting them as such to demonstrate compliance with their obligations in this area.

“What the ATO has noted in its investment strategy guidance is the fact that we can have percentages and, while they may be most common, they are not a mandatory function,” Dunn observed during the recent SmarterSMSF Virtual Day webinar.

He pointed out the guidance also allowed for SMSFs to express their investments in dollar terms or as material assets and provide a rationale as to why they are being held in the fund and how they met the retirement objectives of the members.

“The ATO also said that they would accept, when looking at asset classes, dollar amounts rather than percentages,” Dunn said.

“You may think about a lower spectrum and an upper spectrum for the amounts that may be invested inside the fund, and a benchmark could be added there, but that is not something the ATO discusses in the context of this guide.

“What they also note is that if you have higher asset concentration in the fund or a much smaller number of investments you don’t necessarily need to include asset ranges but you could list material assets that are held in the fund.

Dunn noted an SMSF, for example, may have a bank account and business real property and it would need to list in its strategy that property makes up 90 per cent of the fund’s assets.

“There is no obligation to say the fund needs to hold 80 to 100 per cent in real property. You simply list that asset and it is still going to satisfy the requirements around the Superannuation Industry (Supervision) Regulation 4.09.

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