Your SMSF Investment Strategy
When it comes to investing your super, an SMSF gives you the ability to invest in what you want when you want. But this flexibility comes with certain responsibilities.
You must follow important rules to ensure your SMSF remains compliant and able to access the same low rates of tax as other types of superannuation funds. One key rule which is core to running an SMSF is to create and follow an investment strategy.
In recent years the ATO (who oversee SMSFs) have increased their focus on investment strategies, which means the independent auditors who act as the ‘eyes and ears’ of the ATO are also looking at investment strategy documents more closely.
The ATO enforces the rules on SMSF investment strategies, but following the investment strategy itself is self-regulated. Being self-regulated means you, as a trustee, determine the investment strategy of your SMSF and are responsible for ensuring it’s followed.
This article covers how to view and update your new SMSF’s investment strategy and what you’re able to invest in.
Your SMSF Investment Strategy
An SMSF investment strategy is the core of your SMSF. It’s a written document outlining what your SMSF will invest in and why – it is your plan for making, holding and realising assets consistent with your investment objectives and retirement goals.
What must be included
The ATO provides a good breakdown of what you need in your investment strategy. You can read more here.
- You should tailor the investment strategy to the circumstances of the SMSF members.
- Your investment strategy should change over time.
- You need to consider how the chosen investments impact risk and diversification and how the level of risk from those investments aligns with the members’ needs.
- You need to detail the types of assets your SMSF will invest in (more details below).
- Your investment strategy document must include your decision on whether the SMSF will hold insurance for the members.
One of the great things about having an SMSF is the ability to invest in what you want and not be governed by the investment restrictions of your current superannuation fund. In essence, you set this mandate and have the ability to structure your fund your way!
In general, the investments available to an SMSF are wide-ranging, so nothing prevents an SMSF from investing in any allowable investment. It’s worth noting that investing outside of the Stake platform will jump you up to the StakeSMFS Plus package and incur additional fees (vs the base pack).
Also, the administration time required by you as a trustee will increase.
An SMSF can invest in a wide range of assets such including:
- Cash and Term Deposits
- Stocks (Aussie, US and other international markets)
- Unlisted Equities (i.e. private companies)
- Derivatives such as options, futures or warrants
- Managed Funds – listed or otherwise
- Early Stage investments
- Many more (as long as not prohibited by super laws)
Your investment strategy needs to reference the types of assets your fund will invest in but does not need to list specific stocks or ETFs. The types of assets can be shown by either providing specific percentage allocations (i.e. a range) or by more broadly including or excluding particular types of investments.
Where your SMSF investment strategy document includes specific ranges, you need to ensure the actual investments of your fund remain inside those bandwidths. And before you ask, the ATO has been particular to say that 0% to 100% is NOT an appropriate bandwidth!
Updating your Investment Strategy
We provide you with an initial investment strategy document to customise. You can update it anytime with this template. Just download, edit and send back to us and we’ll handle the rest.
You can update and refine your SMSF investment strategy at any point. After the end of the financial year, when our team prepares all the accounts and minutes for your (electronic) signatures, we will include a trustee minute confirming the review of your investment strategy. This minute shows the independent auditor and the ATO that you’re meeting your obligation to regularly review your investment strategy.
Investment Strategy FAQs