Is your SMSF investment strategy meeting diversification requirements?
The ATO has been sending letters to SMSF trustees where their fund is heavily invested (90% or more) in one type of asset class. The most common example of this is property investment.
If you receive this kind of letter, what this means is that the ATO recognises that the investment in the fund, representing more than 90% of the total fund assets, may be a “diversification risk”.
You would need to review your Investment Strategy and make sure a detailed strategy document is included as part of your next audit.
The ATO suggests that the following must be considered, amongst other things:
- Diversification of your fund investments ie. consider shares investment to diversify your super investments.·
- The liquidity of your investments, meaning ability of your fund to pay benefits as members retire and pay other costs incurred by your fund.
SMSF trustees are ultimately responsible for ensuring that their Investment Strategies meet the requirement under the law.
If your Investment Strategy does not meet the requirements, you may be liable for an administrative penalty of $4,200.
Contact CrossCorp if you need assistance with your SMSF Investment Strategy.
