As trustees and practitioners work through the annual compliance work for the 2021 financial year, the Australian Taxation Office (ATO) is provided a timely reminder (QC 67071) that SMSFs need to regularly review the fund’s SMSF investment strategy to help meet their investment and retirement goals.  The investment strategy is not designed to be a ‘set and forget’ document, but rather a strategy requires the trustees to continuously review the strategy to ensure that it is helping to meet the member’s retirement plans.

How regular?

The regularity of when to review an investment strategy will shift depending upon the circumstances that surround the fund.  This may be when:

• a market correction has occurred
• a new member joins or departs the fund
• a member commences receiving a pension. This is to ensure the fund has sufficient liquid assets and cash flow to meet minimum pension payments prior to 30 June each year.

With the impact of COVID-19 over the past couple of years, addressing issues of liquidity and the expected cash flow requirements of the fund are a further example of when trustees would be conducting a review of the investment strategy. Triggers here would have been where rent relief was been provided, impacting the income inflows of the fund, and if loan relief was been sought (i.e. LRBAs), due to the impacts of the fund to meet its cash flow obligations.

As a minimum the trustees should conduct a review of the investment strategy as part of the fund’s annual compliance requirements.

Conducting the review

This is not simply stating that the fund has reviewed the strategy in accordance with SISR 4.09.  It requires a demonstration as to how the trustees have undertaken the review and any decisions made that have arisen from the review.

It is this evidence that will be required for the audit to assess compliance with the operating standard.  It may also need to include how the trustees continue to comply with the diversification requirement where the fund invests within a single asset or has heavy asset concentration within the fund.

The auditor will be required to check that:

• the SMSF had an investment strategy in place for the relevant financial year that considered the factors within SISR 4.09;
• the fund’s investments during the relevant financial year were in accordance with that strategy; and
• the strategy had been reviewed at some stage during the relevant financial year.

The fund’s auditor may need to notify ATO through lodgement of an auditor contravention report (ACR) where the trustees don’t comply with the investment strategy requirements,

Investment Strategy Review Statement

To address this issue of regularly review the fund’s investment strategy, Smarter SMSF released an Investment Strategy Review Statement that ensures trustees can comply with the ongoing requirements of SISR 4.09.

You can find out more about the suite of Investment Strategy documents, including with the use of our BGL and Class integrations on the documents page.