Managing SMSF

Managing SMSF

Investment Strategy

You need to prepare and implement an investment strategy for your fund, and review it regularly. The strategy needs to reflect the purpose and circumstances of your fund and consider the following:

• Investing in a way to maximise member returns taking into account the risk associated with the investment

• Diversification and the benefits of investing across a number of asset classes

• The ability of your fund to pay benefits as members retire and pay other costs incurred by your fund

Securing the assets of your fund

You need to ensure that your fund’s ownership of its investments is secure. Your fund’s assets should be held in a legally recognised ownership arrangement. The assets to be in the names of all of the individual trustees or in the name of the company as trustee for your fund in the case of a corporate trustee.

Loans or financial help to members or a member’s relative

You can’t lend money or provide direct or indirect financial help from your fund, to a member, or a member's relative.

Acquisition of assets from a related party

You can’t acquire assets for your fund from a related party of your fund. However, there are limited exceptions to this rule where:

• The asset is a listed security and the asset is acquired at market value

• The asset is business real property and acquired at market value

• The asset is an in-house asset, but the level of your fund’s in-house assets does not exceed the threshold for SMSFs of a maximum 5% of total fund assets.

In-house assets

An in-house asset is a loan to, or an investment in a related party of your fund, or an investment in a related trust of your fund. In general, as a trustee you are restricted from lending to, investing in or leasing to a related party of your fund more than 5% of your fund’s total assets.

Investments need to be made and maintained at arm’s-length

Any time your SMSF makes an investment, it needs to be made and maintained on a strict commercial basis. The purchase and sale price of fund assets should always reflect a true market value for the asset.