Documenting a SMSF Investment Strategy
SMSFs offer members great benefits and incentives. Essentially, the amount of investments in which you elect to hold is entirely up to you and the diversification of your investment strategy options are almost limitless.
It is vital that you ensure that your SMSF investments are being used for the sole purpose of providing retirement benefits for the members of the fund. Also, it is also essential that the rules and regulations around the types of investments are maintained and well documented.
One of the great attractions with a Self managed Super Fund (SMSF), is the choice of investment that is available to SMSF trustees in providing for their own retirement. A SMSF allows trustees to invest in; shares within a listed company (both within and outside Australia), buy residential or commercial property, hold term deposits or even hold collectables or artworks (conditions apply).
So, when investing in different asset options, what are some key strategies that you should be aware of?
Can't acquire assets from members
As a general rule assets can not be acquired from a member or relative of a member. However, a SMSF can acquire certain assets from a member. Within the fund, superannuation law allows for a member who hold listed shares, a managed fund or commercial property, to be able to either acquire these assets or gift the value of these assets as a contribution to the SMSF.
It is important to be aware that the transfer of ownership of the asset will trigger capital gains tax and potential stamp duty. It is recommended that prior to transferring ownership, you consult your Discover Super Advisor for further legislation rulings and legal obligations.
As it stands, you may invest up to 5% of the total assets held within your fund in any 'in house asset'. According to the ATO, an in house asset, is an asset of a super fund that is one of the following:
- A loan to or an investment in a related party of the fund
- An investment in a related trust of the fund
- An asset of the find that is subject to a lease or lease arrangement between the trustee of the fund and the related party of the fund
In saying this, it is important to note that you cannot lend money or provide any direct or indirect financial help from your fund to you or a retaliative of you.
One of the most important elements is to keep consistent and ensure that your investment purchases a line with the fund's investment strategy when investing. Under law, all SMSFs are required to prepare an investment strategy including factors of; risk, diversification and the ability to discharge assets it the time arises.
Finally, it is crucial that the SMSF assets are held separate from other personal and business assets. Each transaction made within your SMSF needs to be recorded and accounted for. The annual preparation and administration of the financial statements and compliance audit (to be conducted by an independent auditor), will show these transactions and will be noted if there is any discrepancies or non complying mattes.
It is crucial that you seek professional advice before any action is taken. SMSFs offer great incentives and benefits to members, however, an SMSF has quite technical legal obligations and implantations that must be considered.
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