ATO focus on Self Managed Super Funds (SMSF) investment strategies

The ATO are currently sending letters to about 17,700 self-managed super fund (SMSF) trustees and their auditors where the
SMSF holds 90% or more of its funds in one asset or a single asset class.

It’s important to note that receiving a letter does not necessarily mean the SMSF has breached any rules or that the
investment strategy is inappropriate. However, the ATO are concerned that a lack of diversification can expose the SMSF and its
members to unnecessary risk if a significant investment fails.

The ATO advised that “We’ll ask trustees to review their investment strategy and clearly document the reasons behind the
investment decisions. We’ll also ask trustees to have their documentation ready for their SMSF’s approved auditor for their next
audit to help the auditor form an opinion on the fund’s compliance with these requirements.”

Clients with SMSFs who did not receive a letter from the ATO but have a large proportion of their SMSF assets in a single asset
or asset class should also consider reviewing their investment strategy documentation to ensure clear reasons for the lack of
diversification are included.