Every SMSF is legally required to have a written investment strategy, to review it regularly, and to actually invest in line with it. It is one of the first things an auditor asks for, and one of the most common things trustees get pulled up on.
Download our SMSF investment strategy template
Download the SMSF Investment Strategy template (PDF)
Use it as a starting point and tailor it to your fund. A template filled in generically is worse than no template at all — the ATO is explicit that a strategy has to reflect your fund’s circumstances.
What the strategy has to cover
The ATO requires trustees to consider and document all of the following:
| Requirement | What it means in practice |
|---|---|
| Risk and return | The risk of the investments you hold and the return you expect from them |
| Diversification | The mix of assets, and specifically the risk of inadequate diversification |
| Liquidity | How easily assets convert to cash to pay expenses and member benefits |
| Ability to discharge liabilities | Whether the fund can meet its obligations as they fall due |
| Insurance | Whether to hold life, TPD or income protection cover for each member |
| Member circumstances | Each member’s age, employment status and retirement needs |
The mistake that gets funds qualified
A strategy that allocates 0–100% to every asset class is the single most common problem we see. It technically covers everything, which means it commits to nothing, and the ATO has said directly that ranges this wide do not satisfy the requirement without justification.
Write allocations as meaningful ranges or dollar amounts, and if your fund is concentrated in one asset — a single property, for instance — say so and explain why the trustees consider that appropriate.
Diversification and single-asset funds
A fund holding one property and little else is not automatically non-compliant, but it does need the diversification risk addressed head-on in writing. Trustees should record that they have considered the concentration, why they accept it, and how the fund will meet expenses and benefit payments given the asset is not liquid.
Funds in this position have received letters from the ATO. A strategy that ignores the issue is what turns a legitimate investment into an audit problem.
How often to review it
At least annually — and the review itself must be documented, not just performed. Minute it, even if nothing changes.
Review it again whenever something significant happens:
- A member joins or leaves the fund
- A member starts a pension
- A large asset is bought or sold
- A significant market movement changes the fund’s allocation
- Insurance cover is added or cancelled
What the auditor checks
Your approved SMSF auditor will look for a strategy that exists in writing, is signed and dated, covers all six factors above, has been reviewed in the year, and broadly matches what the fund actually holds. A strategy that says one thing while the fund does another is a problem in itself.
Where the requirement is not met, the auditor may need to lodge an auditor contravention report with the ATO.
Frequently asked questions
Does the investment strategy need to be lodged with the ATO?
No. It is kept with the fund’s records and produced for the auditor each year.
Does every trustee have to sign it?
Yes — all trustees, or all directors of the corporate trustee, should sign and date it.
Can I just use a template unchanged?
No. A template is a structure, not a strategy. It has to reflect your fund’s actual assets, members and intentions.
What if our allocation drifts away from the strategy?
Either rebalance the fund or update the strategy and minute the decision. Leaving the two out of step is what creates the audit issue.
Do we need insurance for members?
You must consider it and document the decision. You are not required to hold it — but “we considered insurance and decided against it because members hold cover personally” needs to be written down.
We prepare this as part of the annual service
If we administer your SMSF, the investment strategy is reviewed and updated as part of the annual process, so it is current and signed before the audit rather than reconstructed afterwards.
Get in touch if your fund needs a strategy drafted, or if last year’s audit raised a question about it.
This page is general information about an SMSF compliance obligation. It is not financial product advice. SMSF Warehouse provides SMSF administration, accounting and audit services and does not provide personal financial advice.