SMSF Investment Strategy: The Basics

investmentA Self Managed Super Fund or SMSF Investment Strategy covers what you can invest with your SMSF. This investment strategy will be created by you, with help from an investment professional to ensure that your strategy includes a broad range of investment options such as money, buying property through SMSF, and shares whether overseas or locally.

Considerations When Creating an SMSF Investment Strategy

Your SMSF investment must be as detailed as possible and should take into account the present and future financial requirements of all fund members—if the fund is managed by multiple members. It should likewise successfully pass the ATO’s (Australian Taxation Office) Sole Purpose Test, with every investment being monitored and maintained regularly. More specifically, it must factor in these crucial SMSF aspects:

  • The potential risks involved in the creation, holding, and eventual realisation of investments within your SMSF. This also includes the potential investment returns, with regards to the fund’s goals and projected cash flow needs.
  • Your fund’s investments structure in its entirety. This should also cover how diverse the investments are and if there’s a risk that they’re going to be exposed to unsubstantial diversification.
  • Whether your SMSF is capable of discharging potential and existing liabilities, sentinelpg.com.au adds
  • Whether your SMSF investments are liquid enough in relation to their projected cash flow needs, which includes tax payments, pension payments, a members’ lump sum benefits if they leave the fund, and members’ superannuation additional liabilities whenever applicable.

Note that according to the SIS Act or Superannuation Industry Supervision Act of 1993, you as the SMSF trustee or director is entirely responsible to ensure that your SMSF investments are compliant with all rules imposed by the ATO and that you’ll be held liable and penalised for non-compliance. This means that the law requires you to create, implement, and document modifications regarding your investments and closely monitor your SMSF investments’ performance.