COMPLIANCE
Charting the course
The The SMSF SMSF investment investment strategy strategy has has been been under under increased increased scrutiny scrutiny in in recent recent times. times. Rob Rob Lavery Lavery takes takes aa look look at at the the items items to to be be considered considered when when formulating formulating an an SMSF’s SMSF’s investment investment plan. plan.
ROB ROBLAVERY LAVERY isissenior seniortechnical technical manager managerwith withthe theknowIT knowIT Group. Group.
In Inaa2018 2018report, report,the theAustralian AustralianSecurities Securitiesand and Investments InvestmentsCommission Commission(ASIC) (ASIC)found, found,having having surveyed surveyedmore morethan than450 450SMSF SMSFmembers, members,almost almost one-third one-thirddid didnot notrealise realisetheir theirfund fundwas wasrequired required to tohave havean aninvestment investmentstrategy. strategy.What’s What’smore, more,28 28 per percent centof ofthose thosesurveyed surveyedadmitted admittedto togiving giving no noconsideration considerationto tomembers’ members’insurance insuranceneeds needs through throughthe thefund. fund. The Thenew newyear yearisisaagood goodtime timeto torevisit revisitthe the investment investmentstrategy strategyrequirements requirementsof ofSMSFs SMSFsand and to totake takethe thetime timeto toreview reviewthose thosethat thatare arein inplace placeto to make makesure surethey theycomply complywith withthe thelaw. law.
The Thelegislation legislation The Theobligation obligationfor forall allSMSFs SMSFsto tohave havean aninvestment investment strategy strategyisiscaptured capturedin insection section52B 52Bof ofthe the Superannuation SuperannuationIndustry Industry(Supervision) (Supervision)Act Act1993. 1993.ItIt states stateseach eachtrustee trusteeof ofthe thefund fundmust mustformulate, formulate,
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review reviewand andgive giveeffect effectto toan aninvestment investmentstrategy strategythat that considers considersthe thewhole wholeof ofthe thefund’s fund’scircumstances. circumstances. Furthermore, Furthermore,this thissection sectionoutlines outlinesthe thesorts sortsof ofissues issues an aninvestment investmentstrategy strategyshould shouldinclude, include,being: being: •• the therisk riskof ofthe theinvestments investmentsand andthe thelikely likelyreturn return from fromthose thoseinvestments investmentsgiven giventhe thefund’s fund’scashcashflow flowrequirements, requirements, •• the thediversification diversificationof ofthe thefund’s fund’sinvestments, investments, •• the theliquidity liquidityof ofthe thefund’s fund’sinvestments, investments,given given cash-flow cash-flowrequirements, requirements,and and •• the theability abilityof ofthe thefund fundto topay payits itsliabilities. liabilities. The Theaccompanying accompanyingregulations regulationsadd addthe the investment investmentstrategy strategyshould shouldalso alsoconsider considerwhether whether the thefund fundshould shouldhold holdinsurance insurancepolicies policiesover overthe the lives livesof ofone oneor ormore moremembers. members. ItItisisworth worthexamining examiningthe therole roleinvestment investment strategies strategiesplay playthrough throughthe thelens lensof ofthese thesethree three obligations: obligations: