SMSF trustees should avoid cutting corners when creating an investment strategy and steer clear of using backdated or template documents, a specialist adviser has noted.
Vincents superannuation advisory director Mailene Wheeler said it was not appropriate for trustees to backdate an investment strategy as it did not exist in the past, but they could declare they had invested in keeping with the strategy that was currently in place.
Speaking during a recent online presentation hosted by The Auditor’s Institute, Wheeler noted this scenario was common with new funds where the trustee has made an investment without a written strategy, but is then requested to produce it when the first set of accounts are lodged.
“What we do in practice is we don’t backdate the investment strategy, but ask clients to prepare a current investment strategy,” she said.
“We’ll get them to document the investment strategy, date it then and ask them to pass a minute or a resolution that states this was actually in effect from the date the fund was established and they hadn’t formally documented it.
“Our experience has always been that the SMSF auditor accepts it, so there’s no need to backdate. It’s valid and the trustees are confirming that they hadn’t written the investment strategy at the time, but they had invested it in accordance with their intended investment strategy.”
She also urged caution about the use of unaltered template strategy documents produced by SMSF administration software, noting they may lack specific information required.
“I’ve seen them and I’ve seen auditors accept them, but the issue is whether they are tailored to the client’s specific circumstances,” she said.
“As an auditor, your role is to look at it and ask: does it consider the fund’s circumstances? Does it address diversification, investment risk, liquidity, the ability to pay benefits and where to hold insurance?
“Our recommendation with clients is that while we can provide a template, we prefer for them to write something out that clearly explains why they have chosen these investments?
“We want them to tell us what the reasoning is, what their goals are, instead of something that’s spat out of our software because since they have invested in it, they can best clearly articulate those things and that reasoning gives us something to hang our hats on.”
