Trustees may receive a letter from the ATO concerning their Fund’s diversification requirements. As Trustees of a Fund, it is your duty to ensure that the investment strategy complies with diversification requirements. It is good practice to note under the Fund’s minutes that the investment strategy is up-to-date and appropriate. The Trustees can edit the SMSF’s investment strategy to suit the Fund’s needs.
If Trustees receive a letter referred to above, they may need to consider the following points to illustrate adherence to the diversification requirements:
Confirm that the investments made meet the Fund’s investment objectives
Confirm that you have considered diversification of your Fund’s investments
Confirm that you have considered the risks associated with an inadequate diversification within the context of your SMSF’s investment portfolio
Confirm that the making, holding and realising and the likely return from your investments have regard to your retirement objectives and expected cash flow requirements
Confirm the liquidity of your investment, meaning the Fund is able to pay benefits as Members retire and pay other costs incurred
Consider whether to hold insurance cover for one or more Members of your SMSF
If you receive a letter referred to above, please make sure to document your adherence to the points noted above and provide a written evidence to the auditor to confirm adherence to the diversification requirements set by the ATO. If you are one of our clients, you can download a compliance form in either Excel or Pdf format below and send us the signed copy of the document.
For more information in regards to investment strategy you can read our page with detailed explanation here.