SMSF investment strategies inappropriate
Hugh Elvy
The InstituteofChartered Accountantsin Australia (ICAA) has said that the some self-managed super fund investment strategies are inappropriate, following an industry forum on self-managed super funds (SMSFs).
The ICAA released a discussion paper on a review of the SMSF regulatory framework prior to hosting the forum. The forum encouraged discussion on the structure and governance of the SMSF sector between industry associations, members, government representatives and practitioners.
Hugh Elvy, the ICAA head of financial planning and superannuation, said: “The forum discussed in detail the issues that are currently influencing the SMSF sector. It then discussed the ways that the industry should, jointly with government and regulators, be addressing these issues, which include SMSF structures, SMSF minimum balances, trustee education, the penalty regime, SMSF borrowing and the [Australian Taxation Office] as regulator.
“The institute feels very strongly about how current SMSF strategies do not detail all the requirements of the Superannuation Investment Supervision Act. As one delegate stated during the forum, you don’t even need the strategy to be in writing.”
Existing requirements for SMSFs demand that each trustee formulate and affect an investment strategy, including the risks involved, the composition of the funds as a whole, the liquidity of the fund’s investment and its ability to discharge its prospective and existing liabilities.
“The institute believes that as a starting point and as a minimum, fund trustees should document both a clear investment objective and a detailed investment strategy that is implemented appropriately and is monitored on an ongoing basis to ensure it meets the stated investment objectives.
“Very broad investment strategies and a lack of documentation explaining the trustee’s reasons for a particular strategy makes assessing the strategy with the requirement highly subjective. This creates real problems for the auditor,” Elvy said.
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