John and Carol received a letter from the ATO advising that they had a high concentration in an asset class – in their case, property.
The superannuation legislation requires an investment strategy to be in place. Their financial planner had already prepared an investment strategy that considered the following matters which form part of a compliant investment strategy:
- diversification
- the risks associated with inadequate diversification
- how the likely return from their investments measures up to their retirement objectives
- the liquidity (cashflow) of their investments, and member insurance needs
We also confirmed with the SMSF auditor that the investment strategy would comply.
After our meeting, John and Carol had comfort that they were complying with the ATO rules. The cost of a non-compliant investment strategy may have resulted in an ATO administration penalty of $4,200 per trustee.
Note: These are real case studies of clients we’ve worked with, though we have changed their names to protect their privacy.
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