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Investment strategy for an SMSF – Suggestions from the Auditor Point-of-View

As an SMSF Auditor, I have seen many instances where the investment strategy is either out-of-date, and does not have the relevant and correct clauses in place. These issues identified include:

  • Asset classes not up-to-date in the investment strategy – More cash/term deposit % outside the range of the identified range.
  • Investment strategies out-of-date (dated prior to 2012) where there is no consideration for the life insurance for Fund members

For both these points, these issues have been around for years now, and the Fund trustees and their accountants should be getting it right by now.

To be fair, majority of the Accountants together with their Fund Trustees generally do get this right, whether it is using a standard template from BGL Simple Fund, or just a single-page generic investment strategy, majority of the required areas are addressed.

The relevant section of the Act is SIS Reg 4.09, with regard to insurance, specifically, section (e) which requires the Fund to consider “whether the trustees of the Fund should hold a contract of insurance that provides insurance cover for one or more members of the Fund.”

There should also be a new area to be considered by SMSF Trustees to be specifically identified as part of their investment strategy especially if they are using it as part of their Funds’ assets – and this is cryptocurrency assets.

Cryptocurrency in SMSF – Investment Strategy

Cryptocurrency has previously been an untouched subject for the investment strategy. For my own personal SMSF, I have invested cryptocurrency as I believe that the technology behind the investments will be here for the long run and will and has already changed the way we interact with each other.

Please find below the crypto clause I have used in my personal SMSF which you may also find useful when dealing with cryptocurrency assets:

“After research and due diligence, the Trustees have considered the risks of maintaining investments in crypto currency, and has accepted the financial risk and exposure the investment has placed on the Fund given the volatility of the investment. We acknowledge there may be a risk of not receiving any Funds from this investment and are willing to accept this risk.”

About the author:

The author is Dinesh Nanayakkara, an ASIC Registered SMSF Auditor providing SMSF Auditing Services to the wider community for the past 5 years and has been involved in the SMSF Industry for more than 10 years. Dinesh holds a Diploma of Financial Planning and is an SMSF Association SMSF Specialist Auditor.

Dinesh has his own SMSF and also has invested in crypto-currency through his SMSF and is actively involved in education programs to educate SMSF Accountants and fellow SMSF Auditors to increase their understanding of cryptocurrency and its requirements.

Disclaimer:

D.S Audit Services is an SMSF Audit-only firm and do not provide financial advice. All information provided is general in nature, and has been prepared without taking into account of the Trustees’ objectives, financial situation or needs. Trustees are advised to consider their own circumstances and seek advice from a Licensed Financial Advisor before investing or making any decision.