Exactly what is required in respect of an SMSF Investment Strategy can be a source of confusion for SMSF Trustees. During the establishment process, your adviser or accountant should have communicated with you the requirement that your SMSF has a documented Investment Strategy and why it is required. The Auditor will need to see this document during the audit process and they will be looking for it to contain specific things so that it meets the legislated requirements. What these things are will be dependent on the Investment Strategy you adopt for your SMSF.
When deciding on your SMSF’s Investment Strategy you will be considering and documenting things such as:
Your risk profile
Investment timeframe
Investment returns
Type of Investments and reasons for choosing them
How much cash you need
Insurance requirements
For example, if you are setting up an SMSF to purchase an Investment property with borrowings,, the Investment Strategy would need to document the expected return on this type of investment, how much cash will be needed to repay the loan and most importantly the reason for a lack of investment diversification.
An Auditor is not asked to form an opinion on whether the Investment Strategy is actually effective in achieving its objective but they are required to sign off that the Investment Strategy meets the requirements of the legislation.
With the right guidance, putting together your Investment Strategy document and ticking off the ATO’s requirements is a reasonably simple exercise and once in place all you need to do is review it each year to ensure that it continues to meet those requirements.
At Lifetime SMSF we can’t prepare your Investment Strategy for you but we have a handy Template and guide that we provide to all new clients. Find out more about of SMSF Administration services.
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