Your Scenario:

I have been asked by my accountants and auditors every year to document and present an Investment Strategy of my SMSF

Question:

What steps must you take to satisfy the Financial Year end’s independent audit?

Answer:

Regulation 4.09(2) of the SIS Act 1994 mandates to all trustees of self-managed superannuation fund to document regularly (at least once a year) its plan for making, holding and realising assets consist with the investment objectives of the trustee – that is, you. The Act provides that you must formulate, review regularly and give effect to an investment strategy that has regard to the whole of the circumstances of your SMSF 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; and
• whether the trustees should hold a contract of insurance for its members.

Tax Tip:

There are no prescribed forms of how it should be documented so long as it contains the fund’s detail, the aforementioned factors, and validly signed off by you as the fund’s trustee.

Common Traps:

It is still not OK if your signed-off investment strategy states one thing but the SIS and fund’s deed say another. For example, for your fund to engage into Crypto investment and/ or enter into a borrowing to acquire an asset, your fund’s deed and SIS regulations must expressly allow it.

Disclaimer

GW Capital Group Pvt Ltd General Advice Warning: This advice may not be suitable to you because it contains general advice that has not been tailored to your personal circumstances. please seek personal advice prior to acting on this information.