The ATO has recently announced that it will be sending out letters to approximately 17,700 self-managed super fund (SMSF) trustees and their auditors.
The ATO has concerns that many SMSF Investment strategies may not meet the diversification requirements under regulation 4.09 of the Superannuation Industry (Supervision) Act (SISA).
The criteria that the ATO has set to target these SMSF’s, is based on those that could hold 90% or more of funds in one asset, or a single asset class.
You will need to ensure that their current investment strategy follows the current requirements under SISA and have their Investment strategy ready to show to their SMSF auditor during their next audit.
The trustee must be able to provide the SMSF auditor with evidence of how they consider the investment strategy meets the following requirements:
- The diversification of fund investments
- The risks of inadequate diversification within the context of their SMSF investment portfolio (for example, the risks associated with the fund’s investments in a diversified portfolio of shares is likely to be lower than that of another asset class, such as cryptocurrency)
- The making, holding, realising, and the likely return from their fund investments relating to their retirement objectives and expected cash flow requirements.
- The liquidity of their investments, allowing the fund to meet costs and pay benefits as members retire
- Whether insurance cover should be held for one or more members.
We recommend that you ensure your most up to date SMSF investment strategies are on file with the funds auditor and the fund auditor is satisfied. The ATO will warn trustees that penalties may apply if their auditor advises they have failed to rectify non-compliance with these requirements.
Regardless of whether your SMSF receives a letter, now is a timely opportunity to discuss these important considerations under regulation 4.09 of SISA.
If you need help in reviewing and updating your investment strategy, you should consider seeking assistance from a licensed SMSF advisor.
Please contact our Bentleys Wealth Advisor directly on 02 9220 0700.
For more information on the above please contact Bentleys Wealth Advisors directly or on +61 2 9220 0700.
This information is general in nature and is provided by Bentleys Wealth Advisors. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs before making any decisions based on this information.
*PRPIA Pty Ltd (ABN 61 144 888 433) trading as Bentleys Wealth Advisors, authorised representatives of Charter Financial Planning, Australian Financial Services Licensee