The Australian Taxation Office will contact more that 17,000 self-managed super fund trustees and their auditors, where the SMSF is holding 90 per cent or more of its funds in one asset or a single asset class.
The ATO says it is concerned that these trustees have not given due consideration to diversifying their fund’s investments.
The ATO will be asking the trustees to review their investment strategies and document the reasons behind their investment decisions.
SMSFs must have an investment strategy, which sets out a fund’s investment objectives and specifies the types of investments it can make.
The investment strategy must be in writing and must be reviewed regularly to ensure it continues to reflect the purpose and circumstances of the fund and its members.
The investment strategy must also include consideration of whether to hold life insurance cover for members.
Factors that need to considered when the investment strategy is being reviewed include diversification, the fund’s ability to pay benefits and liquidity requirements.
It must also consider the members’ needs and circumstances, such as their age and retirement status.
SMSFs must be audited annually. Auditors are obliged to report contraventions to the ATO.
The ATO has the power to require the trustees to enter into a plan to rectify the contravention, with or without necessarily imposing any sanctions.