The investment strategies of self-managed superannuation funds (SMSF) should be examined more closely by the regulator, according to a sector expert.
“How much attention does the ATO (Australian Taxation Office) actually pay to investment strategies? I’m a little bit concerned in fact by the amount of attention that isn’t paid to them,” Cavendish Superannuation head of education David Busoli said.
In particular, Busoli highlighted the fact many existing SMSF investment strategies were far too general in nature.
He said that had basically arisen from the fact certain organisations preparing those documents for trustees were doing so in a manner that protected their own interests.
“I know dealer groups have got to put a fair bit of work and effort into an investment strategy in order to ensure that at least it covers their backsides in the event something goes wrong,” he said.
“But when you look at the default investment strategy that we produce and other people produce, [it] is nothing more than a single page that says we had a meeting and decided we’re going to invest wherever we want, as much as we want for as long as we like, and we’re going to achieve CPI (consumer price index) plus one, and we’ve taken into account all the deed elements.
“It’s absolutely disgraceful that is the only investment strategy in a lot of funds. And the tax office audits those funds and says they’re fine.”
He pointed out if the investment strategy was too general and certain problems arose within an SMSF, the ATO would almost certainly change its tune and fund trustees could find themselves under significant compliance pressure.
In any event, he said the whole SMSF investment strategy would probably need revisiting soon as some of the proposed regulatory changes to come out of Stronger Super reform involved the mandatory inclusion of life insurance and total and permanent disablement cover in those documents.
