At the end of August, the ATO will write to SMSF trustees and their auditors if the fund holds 90% or more of the funds in one asset or single asset class. This is approximately 17,700 SMSFs.
The intention is to ensure SMSF trustees have considered diversification as part of the development of the fund’s investment strategy.Trustees will be asked to review their fund’s investment strategy and to ensure the reasons for investment decisions are clearly documented.
Investing a significant portion of the SMSF’s funds in a single asset or asset class can be done under the legislation. However, the ATO wants to remind trustees to consider the possible risks associated with a lack of diversification and how it can impact the fund and members’ interests.
When establishing or reviewing the fund’s investment strategy, trustees must consider diversification (or the lack of) together with the associated risks.Regardless of the ultimate investment decisions, the basis should be documented, particularly for significant exposure to single assets or classes.
The ATO will also be asking auditors to review the documentation and investment strategy of those funds contacted as part of completing their compliance review.
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Disclaimer and Warning
The information above is of a general nature only. It should not be used as a source to make financial decisions. It’s also important to note that the legislation and figures related to this topic tend to change regularly and therefore the information above may not reflect the current status. We recommend that if you are looking for advice on this matter, you should contact us.