In past weeks, the ATO sent letters to SMSF trustees who hold more than 90% of assets in a single asset class. The ATO is concerned that these SMSFs may not meet the diversification requirements as outlined in the operating standard of the Superannuation Industry (Supervision) Regulations 1994. Trustees need to review their investment strategy to ensure it complies with the standard as non-compliance could result in penalties.

To ensure your investment strategy complies you will need to consider and have evidence of the following: 

  • the diversification of your fund investments; 

  • the risks of inadequate diversification if any; 

  • making, holding and realising and the likely return on those investments in context of your retirement objectives and expected cash flow requirements; 

  • the liquidity of your investments and the ability of the fund to pay benefits as members retire and other costs are incurred by the fund; and 

  • insurance held over one or more members. 

These matters need to be covered in your investment strategy as part of your next SMSF audit. 

To find out more, please contact your accountant at Rosenfeld Kant on (02) 9375 1200 or email gary@roskant.com.au, raul@roskant.com.au, elias@roskant.com.au