To guide SMSF Trustees on investment practices, the ATO has announced plans to contact trustees whose portfolios lack sufficient diversification. If your SMSF strategy is heavily weighted towards a single asset class, now is the time to review and adjust your investments to ensure better risk management.
The Australian Taxation Office (ATO) has indeed emphasized the importance of diversification in Self-Managed Super Funds (SMSFs).
They plan to contact trustees who have 90% or more of their funds in a single asset or asset class1. This is to ensure that trustees are considering the risks associated with lack of diversification, which can expose the fund to unnecessary risks if a significant investment fails.
To comply with the ATO’s guidelines, your SMSF investment strategy should:
Diversify Investments: Ensure your portfolio includes a range of assets and asset classes to spread risk2.
Document Investment Decisions: Clearly document the reasons behind your investment choices and how they align with your retirement goals2.
Review Regularly: Regularly review and update your investment strategy to reflect any changes in your circumstances or market conditions2.
Prepare for Audits: Have your documentation ready for your SMSF’s approved auditor to demonstrate compliance with diversification requirements1.
Being proactive and reviewing your investment strategy now can help ensure it meets the ATO’s requirements and stands up to scrutiny.
Do you have any specific concerns or questions about your current investment strategy? I’m here to help! Click the link and book a 15 min chat.
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