Investments, Strategy

Investment strategies pass muster

SMSF investment strategies

Few investment strategies are falling foul of the required standards, but the ATO has recommended trustees not rely on template solutions.

The ATO is finding very few problems with SMSF investment strategies and is unlikely to consider another letter campaign to remind trustees of their obligations.

“The vast majority of SMSFs are meeting the compliance standards, with less than 1000 investment strategy contraventions being reported by SMSF auditors for the 2020 year,” ATO assistant commissioner SMSF risk and strategy Justin Micale told selfmanagedsuper.

As the regulator has recognised SMSFs are meeting the standards for a compliant investment strategy, a future mail-out campaign dealing with areas of concern, similar to that of August 2019, is unlikely, he indicated.

At that time, the regulator addressed letters to 17,700 funds regarding the high concentration of investments in one asset or asset class.

“There are no plans at this stage to undertake another letter campaign as the majority of trustees are meeting the standards and we have now provided additional guidance on our website,” Micale said.

“We see it as our role as a regulator to help trustees understand and comply with their obligations and to take appropriate enforcement action where necessary in order to help protect the retirement savings of SMSF members.”

However, he noted, while the level of contraventions was low, trustees should not rely on off-the-shelf solutions and consider working with an advice practitioner in creating a strategy.
“Trustees should take care when obtaining standard investment strategy templates as these may not satisfy the super rules.

“Strategies must be appropriately tailored to the SMSF’s particular circumstances and reviewed regularly as required by the super rules.”

According to Micale relevant circumstances may include the personal situation of the members, but a strategy must give consideration to the diversification, liquidity and risks and returns of any investments and the fund’s ability to pay benefits, and whether it should hold insurance.

“We encourage trustees to contact an independent licensed financial adviser for guidance on the preparation of an investment strategy,” he said.

The use of investment strategies and trustees’ compliance with superannuation law is the subject of the lead feature in the latest selfmanagedsuper emagazine. To read that story, click here.

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