The SMSF Investment Strategy

Superannuation & SMSF StrategySMSFs are required under the SIS Operating Standards (SIS Regulation 4.09, under SIS Act 31(1)) to ‘formulate, review regularly and give effect’ an Investment Strategy. Under s34 of the SIS Act contravening the Operating Standards can result in a fine of 100 penalty units, currently $ 17,000.

Under the Regulations the Investment Strategy must consider at least the following (para-phrased):

  • Risk and Return
  • Diversification
  • Liquidity and Solvency
  • Insurance cover for members

Did freezing indexation of the contribution caps change anything?

When the Simpler Super reforms (the Tax Laws Amendment (Simplified Superannuation) Act 2007) were brought in a $ 50,000 Concessional Contributions cap was introduced. This amount was supposed to be indexed annually to the increase in AWOTE (Average Weekly Ordinary Time Earnings) in $ 5,000 increments rounded down. However the 2014/15 year will be the first in which the Concessional Cap will be indexed:

Increase in Concessional Contribution Cap from Indexation

ATO Supervisory Levy – Trend, Transition and Collection

The purpose of the ATO Supervisory Levy is to collect revenue to offset the costs of the ATOs role as regulator of SMSFs. As a result the amount of the levy has been trending upwards in recent years. Additionally the levy is currently being transitioned from being collected for the prior year to a pre-payment for the following year – resulting in a spike in the amount payable in one year, as shown in the following graph:

ATO SMSF Supervisory Levy Amount Payable by Year

New powers for ATO to address SIS Contraventions

Australian Taxation Office - SMSF & SuperannuationAs of the 18th of March 2014 the Tax and Superannuation Laws Amendment (2014 Measures No. 1) Act 2014 received Royal Assent, which gives the ATO new powers in it’s role as regulator of SMSFs to:

  • Issue Rectification Directions
  • Issue Education Directions
  • Issue Administrative Penalties

These new powers will apply from 1 July 2014. The act also sets penalties for Early Access Scheme promoters, which will apply from the date of Royal Assent, among other non-superannuation tax changes.