Show download pdf controls
  • Investment diversification requirements for SMSF strategies

    At the end of August 2019 we will send letters to approximately 17,700 self-managed super fund (SMSF) trustees and their auditors where we 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.

    Your trustee clients may contact you about this letter. To help your clients, remind them to check their investment strategy follows the law, and have their investment strategy ready to show to their SMSF auditor during their next audit. Your trustee clients must be able to provide their SMSF auditor with evidence of how they consider their 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.

    We will warn trustees that penalties may apply if their auditor tells us they have failed to rectify non-compliance with these requirements. If your trustee clients need help, let them know they should consider seeking assistance from a licensed SMSF advisor.

    See also:

    Last modified: 20 Aug 2019QC 59953