ATO Looking to Challenge SMSF Trustees About Lack of Diversification

In a rare attempt to guide SMSF Trustees in how they should or shouldn’t invest the ATO has issued a news release about their intention to approach trustees who they believe have not got sufficient diversification in their SMSF portfolio. So it is time to review your strategy if biased to one asset class.

Does your SMSF investment strategy meet diversification requirements?

At the end of August 2019 the ATO intend to contact about 17,700 self-managed super fund (SMSF) trustees and their auditors where their records indicate the SMSF may be holding 90% or more of its funds in one asset or a single asset class.

They are concerned some trustees haven’t given due consideration to diversifying their fund’s investments; this can put the fund’s assets at risk.

They say further in the release that “Lack of diversification or concentration risk, can expose the SMSF and its members to unnecessary risk if a significant investment fails.

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.”


So what can you do:

It’s a time to be pro-active and not wait for the contact. Review your investment strategy and reasoning now and make sure it will stand up to scrutiny

6 Key Considerations for your SMSF Investment Strategy

Review the ATO guidance on Investment Strategies in a blog I did here:

SMSF Investment Strategy Explained

Understand exactly what your SMSF invest in:

What can my SMSF invest in?

Ideas on diversification that may help you understand why you need to diversify or to back your personal reasons for limiting your exposure to specific classes:

Best Performing Asset Class Annually for Last 20 Years

SMSF Investing – Understanding Home Country Bias

The added value of franking credits in a SMSF Portfolio

Understanding Currency Exposure When Investing Overseas in your SMSF

Are SMSF Investors really comparing Hybrids vs. Company Shares?

Everything you need to know about Property in a SMSF

BITCOIN, DOLLARS, GOLD: What Is the Future of Money?

SMSFs – allocation to international shares

How can you add diversification simply and cost effectively:

This is not a recommendation as you need to understand your own needs and that of your SMSF and to do your own research or get advice. this is just one example of how to access a broad diversification in a easy and cost effective manner.

Vanguard Diversified ETFs – A Game Changer for SMSF Portfolio Design

Are you looking for an advisor that will keep you up to date and provide guidance and tips like in this blog? Then why not contact me at our Castle Hill or Windsor office in Northwest Sydney to arrange a one on one consultation. Just click the Schedule Now button up on the left to find the appointment options.

Liam Shorte B.Bus SSA™ AFP

Financial Planner & SMSF Specialist Advisor™

SMSF Specialist Adviser 

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Verante Financial Planning

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This information has been prepared without taking account of your objectives, financial situation or needs. Because of this you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation and needs. This website provides an overview or summary only and it should not be considered a comprehensive statement on any matter or relied upon as such.

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