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     Investment Strategy for Self Managed Super 07/08
   
Fully compliant with 1 July 2007 Commonwealth legislation being the "Plan to Simplify and Streamline Superannuation"
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About the Investment Strategy for Self Managed Super 07/08

Fully compliant with 1 July 2007 Commonwealth legislation being the "Plan to Simplify and Streamline Superannuation"


Self Managed Superannuation Fund ("SMSF") Investment Strategy

You get a knock at the door. They flash their badge. It is the ATO coming to “help” you with your Self Managed Super Fund. The first thing they look at is your Investment Strategy. Is it up to date? Is it complying with all the latest rules for this year?

What is an Investment Strategy?

It is a strategy which is aimed at the investments of the Self Managed Super Fund (“SMSF”) to achieve a desired outcome and a minimum level of performance.

It is a plan for making, holding and realising the Fund’s assets consistent with the Investment Objective of the Fund.

Why does my Fund need an Investment Strategy?

Under the Superannuation Industry (Supervision) Act 1993 (“SIS Act”) the Trustee of the SMSF is solely responsible and directly accountable for the management of the members’ benefits.

The trustee has a duty to make, carry out and document decisions about investing the assets of the fund and to carefully monitor their performance. This duty involves formulating and implementing an investment strategy. This important duty is prescribed in the SIS Act as a covenant (an obligation of the trustee).

The investment strategy must have regard to the whole of the circumstances of the Super Fund, including:

(i) the risk involved in making, holding and realising the SMSF's investments, and the likely return from these investments, having regard to the SMSF’s objectives and its expected cash flow requirements;

(ii) the composition of the SMSF's investments as a whole, including the extent to which the investments are diverse or involve the entity in being exposed to risks from insufficient diversification;

(iii) the liquidity of the entity's investments having regard to its expected cash flow requirements, for example: payment of tax, superannuation surcharge liability of the members, lump sum benefits if a member leaves the SMSF, or regular pension payments;

(iv) the ability of the SMSF to discharge its existing and prospective liabilities.

The purpose of this obligation is:

• to protect the members’ retirement benefits;

• to minimise the risk of irresponsible or incompetent investments; and

• to ensure investments are made in accordance with the sole purpose and investment provisions of the SIS Act.

Under this approach to managing the investments, the Trustee should implement a due diligence process promoting well thought-out and responsible decision making. This also protects the Trustee from action by members if the investments turn out to be disastrous.

WARNING

If you don't have a valid and complying "investment strategy" then the ATO may state that your self managed super fund is non-complying.

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This document has been prepared by: Narelle Pierce

   Narelle Pierce
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