If you established a self-managed superannuation fund (SMSF) or helped set-up one, you must keep in mind that being a trustee entails responsibilities involving management of the fund’s investment.

The Superannuation Industry (Supervision) Act of 1993 — also known as the SIS Act or super laws — states that trustees are responsible for establishing an investment strategy that would ensure that the fund caters to all the members’ needs.

Establishing an investment strategy is not just a legal requirement under the super laws, it is a crucial component to help you grow your retirement savings.

Here are the things you need to know and understand about an SMSF investment strategy:

What is an SMSF investment strategy?

An SMSF investment strategy is a written document that details your plan for making, holding, and realising assets. According to the super laws, an SMSF auditor ensures the compliance of the investment strategy as part of the annual audit of the fund.

Your SMSF investment strategy also lays out the fund’s goals and the reason and manner by which you want to investment your retirement benefits to meet your goals.

What are the legal requirements of creating an SMSF investment strategy?

As a trustee of your SMSF, you will be directly accountable for the management of the fund’s investments. You will also be responsible for monitoring the performance of the investments.

An SMSF investment strategy should not be a general statement of the fund’s intentions — it must be tailored to the needs of the members and the goals of the fund.

Some of the key things you need to consider when crafting your strategy are the age, employment, and retirement needs of the members.

The following factors must also be stated and explained in detail:

  • Risks – What are the potential risks of your investments and how are they appropriate at the current stage of the members’ lives?  There is a need to assess the risks and the likely return from the investments.
  • Diversification – What will be the components of the fund’s investments? It is a must to ensure the appropriate variety of asset classes to spread investment risks.
  • Liquidity – What is the expected cashflow requirements of the fund? Your SMSF will need access to cash so it is able to pay administrative expenses, income tax, and minimum income stream when they are due.
  • Insurance – Another important factor to consider is insurance needs of all members. It is crucial know whether to provide coverage, such as life, permanent or temporary incapacity insurance for each member. Do not forget to include the beneficiaries.
  • Liabilities – Is the fund able to meet its liabilities?

The investment strategy must detail the share allocations for each asset classes the fund will plans to invest in. You must also expound on how you plan to invest and why you require broad ranges to achieve your goals.

In some cases, separate investment strategies can be designed for each member of the SMSF. This is helpful for those funds whose members have different risk profiles.

What are the rules that must be followed when investing with SMSF?

When creating your investment strategy, you are free to decide the types of assets you want to invest in. However, you must ensure that these assets are allowed by your fund’s trust deed and are not prohibited under the super laws.

Furthermore, you have to ensure that the asset meets the sole purpose test. Check out this guide to know more about the regulations surrounding SMSF investment.  

If your chosen investments breach the super laws, the ATO can take a compliance action against you — you will either pay penalties or you could potentially be removed as a trustee.

When is the right time to review your SMSF investment strategy?

Your SMSF investment strategy is not set in stone — it must be regularly reviewed to ensure that it still meet the current and future needs of your members.

Typically, you must conduct a review annually — it could be part of the yearly audit of your fund.

However, there are certain events which require immediate review of the strategy, including a market correction or when there are changes to SMSF membership, such as an addition of a new member and the death, departure, or retirement of an existing member.

What is the role of the SMSF auditor in your investment strategy?

As mentioned earlier, your SMSF auditor will include checking your investment strategy as part of the annual audit of your fund.

In essence, the auditor will check three things: whether your SMSF had an investment strategy that outlines the factors such as risks, diversification, etc; the compliance of your investment to your strategy; and the whether the strategy had been reviewed at some stage during the financial year.

Any non-compliance will be notified by the ATO through an auditor contravention report.


Advertisement: See some of the lowest rates for SMSF loans that are available in Australia today.

Update resultsUpdate
LenderHome LoanInterest Rate Comparison Rate* Monthly Repayment Repayment type Rate Type Offset Redraw Ongoing Fees Upfront Fees LVR Lump Sum Repayment Additional Repayments Split Loan Option TagsFeaturesLinkCompare
6.99% p.a.
7.00% p.a.
$2,659
Principal & Interest
Variable
$0
$230
70%
Featured
  • Available for Purchase and Refinance. No application fee and no settlement fee
  • No monthly, annual or ongoing fees
  • Access your SMSF loan via our easy-to-use online app Smart Money
7.24% p.a.
7.25% p.a.
$2,726
Principal & Interest
Variable
$0
$0
70%
7.75% p.a.
7.83% p.a.
$2,866
Principal & Interest
Variable
$0
$995
80%
7.55% p.a.
7.94% p.a.
$2,811
Principal & Interest
Variable
$395
$1,920
80%
7.74% p.a.
7.75% p.a.
$2,863
Principal & Interest
Variable
$0
$0
80%
7.49% p.a.
7.50% p.a.
$2,794
Principal & Interest
Variable
$0
$230
80%
Featured
  • Available for Purchase and Refinance
  • No application fee and no settlement fee
  • No monthly, annual or ongoing fees
Important Information and Comparison Rate Warning

Base criteria of: a $400,000 loan amount, variable, fixed, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. However, the ‘Compare Home Loans’ table allows for calculations to be made on variables as selected and input by the user. Some products will be marked as promoted, featured or sponsored and may appear prominently in the tables regardless of their attributes. All products will list the LVR with the product and rate which are clearly published on the product provider’s website. Monthly repayments, once the base criteria are altered by the user, will be based on the selected products’ advertised rates and determined by the loan amount, repayment type, loan term and LVR as input by the user/you. *The Comparison rate is based on a $150,000 loan over 25 years. Warning: this comparison rate is true only for this example and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. Rates correct as of .

Speak to an SMSF lending specialist

Whether you're looking to refinance or purchase investment property with your SMSF our partners can help you find the right SMSF home loan.

Collections: