Why your SMSF needs a solid Investment Strategy

— 5 min read

Investment strategy: a compliance obligation for Trustees

One of the advantages of a Self Managed Super Fund is that it gives you control over how your superannuation is managed and where your money is being invested. With this control, comes strict compliance responsibilities that you need to meet each year.

You must always keep in mind that as an individual trustee, or director/member of a corporate trustee, you are ultimately responsible for running the fund, and making decisions that affect the retirement interests of each fund member.

Are you better off as an individual or a corporate trustee in your SMSF?

 

To make sure that your SMSF remains compliant, there are a number of obligations that need your ongoing attention and consideration.

One of them is that you are required to regularly review your fund’s investment strategy and document proof of this review.

Without an Investment Strategy, your annual return cannot be lodged, which would rule the fund non-compliant.

The following courses of action are possible against trustees who have not complied with Super laws:

  • Education direction
  • Enforceable undertaking
  • Rectification direction
  • Administrative penalties
  • Disqualification of a trustee
  • Civil and criminal penalties
  • Allowing the SMSF to wind up
  • Notice of non-compliance
  • Freezing a SMSF’s assets

What it is and why is it so important?

The investment strategy should consider what you want your investment portfolio that your fund is made out of to achieve and map out appropriate strategies and asset allocation to help all trustees of the fund to meet their goals.

Because it’s a legal requirement for any SMSF, it’s important to make sure that you’ve had a formal investment strategy created, rather than an initial discussion without any formal documentation in place.

The actions against non-compliant funds listed above are typically taken against the Trustee or Director of Trustee Company and therefore cannot be paid by the fund but rather the individuals.

To build out the strategy, we’ll gather a detailed understanding of each member’s personal circumstances, considering things such as life stage, liquidity needs, risk tolerance, insurance requirements and retirement plans.

This review is essential to consider any changes to the market, or to the personal circumstances of your fund’s trustees that may prompt the need for an adjustment to your investment strategy.

When is a review appropriate?

This documentation will be required for your annual audit. If you require any assistance developing or reviewing your investment strategy, I can assist you with this.

To chat with me about your SMSF investment strategy, simply call 1800 376 376 or book an appointment.

Disclaimer: *The information contained in this site is general and is not intended to serve as advice. DPM Financial Services Group recommends you obtain advice concerning specific matters before making a decision.

Authors

Simon Thwaites

CFP®, BA, GradDip App. Fin & Invest

Consultant
Sydney

Connect on LinkedIn

Simon joined DPM in 2015, bringing with him more than 20 years experience in financial planning and funds management. He has in-depth knowledge across all aspects of financial planning. Simon is a Certified Financial Planner and holds a Post Graduate Diploma of Applied Finance and Investment. Simon’s role is to identify the financial needs of his clients and align them with the appropriate specialist.