Don’t Get Panicked by the Message
The ATO will ask nearly 18,000 SMSFs to provide evidence their investment strategy meets the retirement objectives and cash-flow requirements of the fund following on from concerns they may not be meeting investment diversification requirements under superannuation regulations.
The emphasis is on funds that have over 90% of their fund investments in a single asset – generally real property. Undoubtedly some such trustees will believe they have committed an offence and will consider selling down the asset to create greater diversification for fear of incurring the ATO’s wrath. This would be a mistake.
Irrespective of the general virtues of diversification the rules only say it must be considered. They don’t say it must be achieved. If it has been properly considered, and its absence justified, the rules are satisfied. The problem with some investment strategies is that they are little more than a regurgitation of the requirements, a statement that they have been considered and an asset asset allocation that is meaningless, such as 0% to 100% in any asset.
For years now I have been saying that it was just a matter of time before the ATO would be checking to see if investment strategy documents were reasonable. This is why I developed an investment strategy tool, exclusively for our Alliance Partners, that does just that. If you’d like more information please contact me.