Do’s And Don’ts While Creating SMSF Investment Strategy

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Owing to the ongoing pandemic, the global economy is facing turbulent times, which had given rise to turbulence in investment markets too. In such a situation, self-managed superannuation funds of SMSFs can come very handy. As a SMSF trustee, you can decide how can you manage your fund and you will have full control on where to make your investment. After retirement, you will have a clear visibility of your retirement savings, which will give you more confidence in making decisions about investments.

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What advice can you get from a SMSF accountant?

The interest you will get in a self-managed superannuation fund is a financial product. If you’re from Perth and want to get advice from a SMSF accountant Perth, please make sure that he/she holds an Australian Financial Services License (AFSL). Without an AFSL, an accountant can still give you some services. These are as follows:

  1. They can provide factual information regarding investment strategies like what trustees will be required for consideration and how to prepare documents for an auditor scrutiny.
  2. They can give advice on the operation or structure of their SMSF on condition the advice can only be implemented for the purpose of compliance with the superannuation legislation.
  3. They can give you suggestions about broad asset allocation.
  4. You can also get some advice on tax implications of acquiring, holding and disposing of an interest in SMSF.

Do’s while creating SMSF investment strategy

Following is a list of deeds you can go for while creating the investment strategy.

  1. Preparing an investment strategy: Every long-term investment requires a prior planning. Here, you have to prepare a written investment strategy so that the investment can offer enough benefits for the member(s) of the fund.
  2. Looking for professional assistance and advice: Setting up a SMSF is neither easy, nor its control as the laws associated with it, are quite complicated. If you are in charge of a SMSF, you have to take important decisions regarding investments and also comply with the necessary laws. So, it is always recommended to consult with professionals to get key advice and assistance.
  3. Reviewing of contribution strategy: For an employee, an amount of 9% of the salary is paid into the superannuation fund. But you have the option to increase that amount to more than 9% to boost your SMSF and investment potential. One thing you should keep in mind is that, the post-tax money which you transfer to a superannuation fund will not deduct your tax. However, your fund will not be able to pay the 15% of tax that is deductible on this income.
  4. Borrowing within superannuation fund: Since 2007, this has become one of the greatest benefits of superannuation fund. Currently, for the purpose of purchasing an investment in a proper way, your SMSF can borrow within the superannuation fund. The important point to note here is that, you do not need to have enough cash in your superannuation fund to buy a property outright. As there occurred sharp reduce in the contributable amount to a SMSF, you should go for growing your superannuation fund. There are a number of benefits for borrowing in super which include low income tax, no tax on pension earnings and capital gains tax savings.
  5. Serious administer of superannuation: SMSFs are controlled by Australian Taxation Office (ATO) and they monitor all the activities of these funds very closely. If you cannot comply with the legislation, ATO can tax the assets of the fund at a higher rate of 45% and prosecute you. Moreover, if they find your funds to be at risk, they can disqualify or remove you as a trustee or freeze the assets of your fund.
  6. Renewal of Trust Deed: It is always important to update the fund’s Trust Deed because changes are always made to the Superannuation Industry (Supervision) Act (SIS Act). You should keep in mind the time when your Trust Deed was established, because it may be possible that, that Trust Deed is no longer complying with the current set of laws. For advice, you may get an expert review all the documents related to it.
  7. Reviewing death benefit nomination: This is a must-do for an investment strategy, otherwise your Will can become ineffective when superannuation benefits are disposed after a person’s death. Before death, it is always advised to review the death benefit nomination to make it certain that all your directions mentioned in the Will must be followed after your death.
  8. Doing a life insurance within the SMSF: Life is unpredictable and you should always be prepared for unexpected to happen. Life and Total Permanent Disability (TPD) Insurance through a superannuation fund can be very effective in the sense that, you can still pay bills and expenses if something happens.

Don’ts while creating an investment strategy:

Well, there are certain things in life that we should not do to keep the ball running, smoothly and effectively. That is applicable for creating investment strategy also.

  1. Providing financial assistance to other members of SMSFs: If you’re a SMSF trustee, you cannot lend money or provide financial assistance to a member of the SMSF, or a relative of the member, no matter whether you charge commercial interest rates on that loan or not. This strategy may sound interesting for an investment decision, but it is actually against the SIS act and regulations.
  2. Acquiring residential property from a related party: You cannot acquire any residential property from a related party within an SMSF. However, exceptions may be made in some limited cases. If the acquisition of the assets from the related party does not result in more than 5% of the assets of SMSF getting invested in related parties, it can be done. Other cases include secured assets like shares, units or bonds listed on the stock exchange and assets being ‘business real property’.

Ending note

As mentioned a number of times, you should always consult a professional who can give you proper guidance as the laws regarding SMSFs are quite complicated. You can consult with an accountant Perth for more detailed queries.


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