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The ATO has recently written to about 17,700 SMSF trustees and their auditors where they believe that the SMSF’s investment strategy may not meet the diversification requirement.  The ATO advises that they are writing to SMSF’s that hold 90% or more of funds in one asset, or a single asset class.

The ATO reminds SMSF trustees that their investment strategy must meet the following requirements.

  • the diversification of fund investments
  • the risks of inadequate diversification within the context of their SMSF investment portfolio (for example, the risks associated with the fund’s investments in a diversified portfolio of shares is likely to be lower than that of another asset class, such as cryptocurrency)
  • the making, holding, realising, and the likely return from their fund investments relating to their retirement objectives and expected cash flow requirements
  • the liquidity of their investments, allowing the fund to meet costs and pay benefits as members retire
  • whether insurance cover should be held for one or more members.