ATO warns on ‘set and forget’ SMSF strategies

Self-managed superannuation fund (SMSF) trustees are being reminded that their fund is not one that they can “set and forget” and that it needs to be regularly updated for changing circumstances. 

In an update from the Australian Taxation Office (ATO), it said trustees should be continuously review their investment strategy. 

This included when a market correction occurred, a new member joined or departed the fund or when a member commenced receiving a pension to ensure there were sufficient liquid assets and cashflow. 

“Self-managed super funds are required to prepare and implement an investment strategy to help meet their investment and retirement goals,” it said. 

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“The investment strategy is not designed to be a ‘set and forget’ document but rather a strategy that you continuously review to ensure you are meeting your retirement plans. 

“You should review your strategy as markets can shift and the circumstances of your SMSF may change.” 

Changes should be reviewed at least on an annual basis, the ATO said. 

As of 30 June, 2020, there were 593,000 SMSFs in Australia holding $733 billion in total assets with more than 1.1 million members.  

It recommended investment strategies should be put in writing and be tailored to the fund’s circumstances rather than just repeat legislation. This included considering a members’ age, employment status, retirement needs and risk appetite. 

“When formulating your investment strategy, it is not a valid approach to merely specify investment ranges of 0% to 100% for each class of investment,” the ATO said. 

“You also need to articulate how you plan to invest your super or why you require broad ranges to achieve your investment goals to satisfy the investment strategy requirements. 

“The percentage or dollar allocation of the fund’s assets invested in each class of investment should support and reflect your articulated investment approach towards achieving your retirement goals.”