ATO Warns Trustees With Poor Diversification To Review Strategy

After announcing that it will be writing to SMSF trustees with a high concentration of one asset in their fund, the ATO has said it will be asking these funds to review their investment strategy and document the reasons behind their investment decisions.

Earlier this month, the ATO announced it would be writing to 17,700 SMSF trustees who have more than 90 per cent of their assets in a single asset class and their auditors.

In an online update, the ATO said it will be contacting the 17,700 SMSF trustees and their auditors at the end of this month where its records indicate the SMSF may be holding 90 per cent or more of its funds in an asset or a single asset class.

The ATO stated that it will be asking these trustees to “review their investment strategy and clearly document the reasons behind the investment decisions”.

“We’ll also ask trustees to have their documentation ready for their SMSF’s approved auditor for their next audit to help the auditor form an opinion on the fund’s compliance with these requirements,” the ATO stated.

The ATO said it is concerned that some of these trustees haven’t given due consideration to diversifying their fund’s investments; this can put the fund’s assets at risk.

“Lack of diversification or concentration risk can expose the SMSF and its members to unnecessary risk if a significant investment fails,” it said.


By Miranda Brownlee

SMSF Adviser

12 August 2019

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