Under the Superannuation Industry (Supervision) Act 1993 (“SIS Act”), the Trustee of a Self-Managed Superannuation Fund (“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 SMSF and to carefully monitor their performance. This duty involves formulating and implementing an investment strategy. This duty is prescribed in the SIS Act as a covenant (an obligation of the Trustee).
The purpose of this obligation is to make the Trustees consider the appropriateness of the investments undertaken by the SMSF with respect to the circumstances of its members and also the requirements of the SMSF at law. Under this approach to managing the investments, the Trustee should implement a due diligence process promoting well thought out and responsible position making. This also protects the Trustee from action by members if the investments turn out to be disastrous.
If you do not have a valid and complying “Investment strategy”, the ATO may determine that your SMSF is non-complying.
The SIS Act states that Trustees are obliged to review their SMSF investment strategy regularly. Preparing a new investment strategy document assists to demonstrate that the Trustees have reviewed their strategies and also ensures that their investment strategy document complies with the latest regulations and requirements. Trustees should also review their investment strategy whenever there is a change to the SMSF, such as a new member joining.
As circumstances change over time, the investment strategy of the SMSF should be seen as a working document and should be reviewed, updated (if required), at least annually.
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