The ATO, who regulate SMSFs, say that before you start making investments you must have an investment strategy, which set out your fund’s investment objectives and specifies the types of investments your fund can make. Your investment strategy should be in writing and must:
be reviewed regularly to ensure it continues to reflect the purpose and circumstances of your fund and its members (your review and any decisions made should be documented)
consider whether to hold insurance cover (such as life insurance) for each member of your SMSF.
Here’s another one of the ATO’s great little videos to help explain it. It’s 2.30 mins in duration.
As always, if you have any questions, please contact us to discuss.
Borrowing money for an asset within a SMSF (most commonly an investment or business property) can be a great way to leverage your returns, but like all gearing, it can magnify the losses too! It’s just as important to follow the very strict guidelines if it’s something you’re interested in.
Full Financial Advice have the expertise to help you if you need it 🙂
Below is the short ATO Youtube video on the subject.
More of the more common investment assets for a SMSF is an investment property. Whilst the ‘great Aussie dream’ of owning property can be a sound idea, what is not is you or your relative staying in it – even if it’s for a night!
Assets where you enjoy the benefit now – ie, getting the use of the asset before your retirement – can be classified as ‘in-house’ asset, and the value of that asset therefore can’t be more than 5% of the value of your fund. Not only can the ATO force you to sell that asset as a penalty, you can be fined thousands and thousands of dollars as well.
So, if you have the urge to enjoy your property now – dont! Call me instead 🙂
Here’s a link to the ATO’s Youtube video about in-house rules. It’s actually quite good and is only 2 mins long. It’s not quite as fun as a cat playing a piano on Youtube, but still pretty worthwhile.
The ATO outlines a lot of the moving parts to a SMSF fulfilling its legal obligations. They can be fun, provide you considerably more choice than you have now and help with estate planning but there is a lot of work that needs to be done. For many though, despite the work, they are a great choice.
It’s obviously important to get advice, and Full Financial Advice can help you provide with everyone of those professionals – accountants, SMSF specialist administrators, legal advice. The lot.