The ATO is concerned some trustees haven't given due consideration to diversifying their fund’s investments; this can put the fund’s assets at risk. Lack of diversification or concentration risk can expose the SMSF and its members to unnecessary risk if a significant investment fails.
The ATO will ask trustees to review their investment strategy and clearly document the reasons behind the investment decisions.
The ATO will also ask trustees to have their documentation ready for their SMSF’s approved auditor for their next audit to help the auditor form an opinion on the fund’s compliance with these requirements.
Before you start making investments you must have an investment strategy. This sets out your fund’s investment objectives and specifies the types of investments your fund can make. Your investment strategy should be in writing and must:
- be reviewed regularly to ensure it continues to reflect the purpose and circumstances of your fund and its members (your review and any decisions made should be documented); and
- consider whether to hold insurance cover (such as life insurance) for each member of your SMSF.