New Rules For SMSF’s Investment Strategies

Measures were introduced on the 7th August 2012 to make amendments to the SIS Regulations that cover the next group of changes from the Stronger Super recommendations.

The main changes introduced apply to new steps that trustees need to now take with their SMSF Investment strategies.

The ATO has issued a reminder that new regulations apply to SMSF’s from the 2012/13 income year.

They require trustees of SMSF’s to:

  • value the fund’s assets at their market value for the purpose of preparing financial accounts and statements of the fund (to assist with this, the ATO has a document entitled ‘ Valuation guides for self-managed superannuation funds’ on their website);
  • consider insurance for their members as part of the fund’s investment strategy; and
  • review the fund’s investment strategy on a regular basis.

Previously it was only a requirement to formulate and give effect to an investment strategy. Whilst SMSF investment nesteggmost people would generally review their investment strategy fairly regularly in an ad hoc fashion, this now enshrines it in the SIS regulations.

The ATO have stated that these reviews “should occur on a regular basis and could be evidenced by documenting decisions made in the minutes of meetings held during the income year”.

Unless you have made major changes throughout the year, we think dovetailing this with organizing your annual fund compliance / return makes sense. In other words, do an annual review of your investment strategy when you do your annual return.

Trustees who fail to comply with these requirements may be subject to penalties.

ATO given more powers to deal with non-compliance

Trustees have always been required to keep the money and other assets of the SMSF separate from those held by the trustee personally, or by a standard employer-sponsor or an associate of a standard employer-sponsor.

A regulation has now made this requirement an operating standard, giving the ATO the power to enforce compliance.

Contraventions may result in a fine not exceeding 100 penalty units.

Note: Penalty units were recently increased to $170 per penalty unit; therefore, e.g., 100 penalty units would equal $17,000 – quite a fair amount of change!

There may be certain situations where an unavoidable restriction prevents holding assets in the fund’s name, so the ATO has advised that they hope to publish a ‘separation of assets guide’ to provide advice on what trustees can do in these situations.

Ref: The TAXAGENT magazine, issue 57,  December 2012


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