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IT'S YOUR MONEY ... BUT NOT YET! - Self Managed Superannuation15th April, 2009Self Managed Superannuation allows great freedom in how you go about providing for your retirement. The ATO has recently issued a reminder to Trustees that this freedom has some responsibilities especially in relation to maintaining a written investment strategy for your Fund. Here is an excerpt from an ATO publication which sets out the Trustees responsibilities and lists what is required of an Investment Strategy. How does your strategy measure up against this list? We have recently seen some cases where the ATO have taken action against trustees for a strategy that does not satisfy the requirements. We are not licenced Financial Planners - however if you require assistance with preparing an investment strategy and do not have an established relationship with one, we can provide you with details of financial planners who work on a fee for service basis.
Excerpt from ATO Publication - "DIY Super - Its your money ... but not yet!"
Have an investment strategy and invest responsibly
Trustees of self managed super funds are required to prepare and implement an investment strategy for their fund, and regularly review the strategy. This requirement is to help ensure that the best possible investment decisions are being made for the fund.
The investment strategy must reflect the purpose and circumstances of the fund and consider:
· investing in such a way as to provide sufficient member returns, taking into account the risk associated with the investment
· appropriate diversification and the benefits of investing across a number of asset classes (for example, shares, property, fixed deposit) in a long-term investment strategy
· the ability of the fund to pay benefits as members retire and pay other costs incurred by the fund, and
· the needs of members (for example, age, income level, employment pattern and retirement needs).
An appropriate investment strategy should set out the investment objectives of the fund and detail the investment methods the trustees will adopt to achieve these objectives. An investment strategy should be unique to the requirements of a particular fund and its members, and should be reviewed regularly and updated as required. It should allow trustees to be able to measure investment performance against their retirement income goals.
Trustees must make sure that all investment decisions are made according to the investment strategy. If in any doubt, they should seek investment advice or appoint an investment manager in writing.
Do:
· develop an investment strategy and review it regularly
· ensure your investment strategy takes into account your retirement goals
· take into consideration the risks involved in certain investments
· take into consideration what bills the fund has to pay and allow enough cash to meet these expenses
· take into consideration when benefits will need to be paid out
· consider diversifying the fund’s investments.
Don’t:
· invest without considering your strategy and your overall goals for retirement.
Example
The trustees of a self managed super fund are approaching retirement age. As a result, they have decided to amend their investment strategy with the aim of investing in assets which give a lower return but have less risk. They believe this will provide more stability for their benefits until they are paid out.
Keep proper records
Trustees must keep some records for a minimum of five years and other records for a minimum of 10 years. This is to ensure that they can verify their decision-making processes and an accurate history of the fund can be established. If problems arise in the future, these records can be used to determine the right course of action.
Records to be kept for five years are:
· accurate and accessible accounting records that explain the transactions and financial position of the fund, and
· an annual operating statement and an annual statement of the fund’s financial position.
Records to be kept for 10 years are:
· minutes of trustee meetings and decisions (where matters affecting the fund were discussed), records of all changes of trustees and the members’ written consent to be appointed as trustees
· copies of all annual returns lodged, and
· copies of all reports given to members.
Do:
· keep minutes outlining investment decisions
· keep minutes to show how decisions are made
· keep records to explain the transactions of your fund
· keep annual operating statements and annual statements of your fund’s financial position
· keep records to show who the trustees of your fund are and their consent to act as trustees
· keep copies of returns and information provided to members.
Don’t:
· make decisions without documenting the decision
· throw out documents that explain what your fund has been doing
· throw out documents after returns have been lodged.
Example
A married couple has a self managed super fund. They decide to buy some Australian mining shares. They prepare a minute to explain all the details of their decision to buy those shares, including the amount they are investing.
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