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Is your SMSF Investment Strategy compliant and in order?Or are you putting your SMSF at risk?

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What must be Considered in a SMSF Investment Strategy?

Your Investment Strategy needs to take into account almost every aspect of your SMSF and the following examples are just some of the considerations you need to take into account in preparing your Investment Strategy.

  • Have you considered whether to get insurance?
  • Do you have enough liquidity in your SMSF investment?
  • What about the risks in your investments and their likely return?
  • Have you diversified your investments enough?
  • Are there any members who will be retiring soon?
  • How will they be paid out?
  • What costs will the SMSF incur?

This may sound daunting or even intimidating and for many people it is, however, it doesn’t have to be that way.

At Investors Direct we have the tools and expertise necessary to help you prepare your personalised SMSF Investment Strategy. Our SMSF Qualified Financial Planners can assess your situation and help you meet all the requirements that you need to keep your SMSF compliant and your retirement funds safe.

Do you have a SMSF Investment Strategy?

According to Superannuation laws all SMSFs must have an Investment Strategy but not everyone knows this is required. When an SMSF is setup it usually has a default or generic template Investment Strategy to tick the compliance box but, in reality, many of these would fail if scrutinised under an audit. It’s quite possible many SMSF setups are in breach of their Investment Strategy already.

For example, if your Self Managed Super Fund Investment Strategy doesn’t state you have allocated a portion of your SMSF Funds to property and you’ve bought one, you could very well be in breach already, putting your retirement funds at risk.

For this reason it’s important to consider all aspects of your SMSF strategy.

Quite often people “review” their Investment Strategy when they do their tax returns. Simply looking at your template and creating some minutes to say you’re still happy won’t necessarily make the cut either according to the relevant superannuation rules.

For example, you may have a dual member fund with the members being aged 35 and 50. This probably doesn’t sound like a problem but it could be. The investment approach or risk appetite of a 35 year old compared to the 50 year old would be quite different and this needs to be reflected within the Investment Strategy.

Superannuation Industry (Supervision) Act (SIS)

Within the SIS Act are a number of key rules and regulations that govern how a Self Managed Superannuation Fund can operate as well as outlining the obligations on the Trustees.

One of the key rules is that the trustees of a SMSF must have an Investment Strategy that.sets out the investment objectives of the fund as well as details of the investment methods the fund will adopt to achieve these objectives, including potential SMSF loans.Specifically, the SIS Act Regulation 4.09 states that:

The trustee of the entity must formulate, review regularly and give effect to an Investment Strategy that has regard to the whole of the circumstances of the entity including, but not limited to, the following:

  • The risk involved in making, holding and realising, and the likely return from, the entity’s investments, having regard to its objectives and expected cash flow requirements;
  • The composition of the entity’s investments as a whole, including the extent to which they are diverse or involve exposure of the entity to risks from inadequate diversification;
  • The liquidity of the entity’s investments, having regard to its expected cash flow requirements;
  • The ability of the entity to discharge its existing and prospective liabilities
  • for a self managed superannuation fund–whether the trustees of the fund should hold a contract of insurance that provides insurance cover for one or more members of the fund.

As you can see, the Trustees must ensure that all investment decisions are made in accordance with the Investment Strategy. In addition, they must also ensure t they take into account all the circumstances of the fund when formulating their Investment Strategy.

More importantly, without the help of a Financial Planner, it’s very easy to miss the mark when it comes to meeting your obligations as a Trustee and place your superannuation at risk.

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Investors Direct Financial Group

Investors Direct Financial Group (IDFG) was established in 2001.
Our mission is to help our clients achieve and maintain their financial freedom.

Members of the IDFG Group include:
  • Nanmon Financial Services Pty Ltd, trading as Investors Direct Financial Group (ABN: 52 097 697 820 ; ACL: 402950)
  • ID Property Advisory Pty Ltd (ABN: 69 141 716 412 ; Real Estate Licence: 071792L)
  • Investors Direct Financial Planning Pty Ltd(ABN: 50 141 139 228 ; AFSL: 385827)
  • Investors Direct Property Management Pty Ltd (ABN: 59 153 184 859 ; Real Estate Licence:073458L)
  • 8 Star Homes Pty Ltd (ABN: 83 135 066 876)
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