Extracted from article in the ATO Newsroom 20 Aug 2019

At the end of August 2019 the ATO will send letters to approximately 17,700 self-managed super fund (SMSF) trustees and their auditors where
the ATO believe the SMSF investment strategies may not meet the diversification requirements under regulation 4.09 of the Superannuation Industry (Supervision) Act (SISA). This is because our records show these SMSFs may hold 90% or more of funds in one asset, or a single asset class.

You may wish to contact your registered Financial Adviser to check that your investment strategy follows the law, and have the investment strategy ready to show a SMSF auditor during their next audit. You must be able to provide the SMSF auditor with evidence of how you consider that the investment strategy meets the following requirements:

  • the diversification of fund investments
  • the risks of inadequate diversification within the context of their SMSF investment portfolio (for example, the risks associated with the fund’s investments in a diversified portfolio of shares is likely to be lower than that of another asset class, such as cryptocurrency)
  • the making, holding, realising, and the likely return from their fund investments relating to their retirement objectives and expected cash flow requirements
  • the liquidity of their investments, allowing the fund to meet costs and pay benefits as members retire
  • whether insurance cover should be held for one or more members.

Penalties may apply if the auditor tells the ATO that they have failed to rectify non-compliance with these requirements. If you need help, consider seeking further assistance from a licensed SMSF adviser.

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