SMSF Investment Strategy - Do's and Don'ts for Accountants

10 Jun 2020

Lyn Formica

Head of SMSF Technical & Education Services

All SMSF trustees are required to “formulate, regularly review & give effect to” an investment strategy for their fund. The first person they often turn to for help is the fund’s accountant, but what can accountants do without a licence?

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An interest in a super fund, including a self managed super fund (SMSF), is a financial product. Accountants are generally prohibited from providing advice in relation to financial products unless they hold an Australian Financial Services Licence (AFSL).

However, accountants can provide some services to SMSFs without being covered by an AFSL (either because the services are not financial product advice or they are covered by an exemption).

For example, in relation to investments and the fund’s investment strategy, provided they give the appropriate warnings an unlicensed accountant can provide a fund trustee:

  • factual information about investment strategies (for example, what trustees are required to consider, how to document one which will stand up to ATO/auditor scrutiny),
  • advice on the operation or structure of their SMSF provided the advice is for the sole purpose of, and only to the extent reasonably necessary for, ensuring compliance with the superannuation legislation [Corporations Reg 7.1.29(5)(c)]. Importantly this exemption does not apply to advice given in relation to SIS s.52B(2)(f) or Regulation 4.09 of SIS (ie the provisions requiring an investment strategy),
  • broad asset allocation advice within their SMSF (for example, what proportion of funds should be allocated across one or more investment categories) [Corporations Reg 7.1.33A], and
  • advice on the tax implications of acquiring, holding or disposing of an interest in an SMSF or a financial product held through the SMSF [Corporations Reg 7.1.29(4)].

This means the do’s and don’ts for unlicensed accountants as far as helping SMSF trustees with their investment strategy include:

DO for SMSF investment strategies

  • Explain to trustees the things they need to consider in formulating their investment strategy (for example statements such as “The superannuation law does not require diversification, but rather that trustees consider it” or “It is not compulsory to include asset allocation ranges in your strategy but it is encouraged by the ATO”).
    Factual information of this nature should be accompanied by a disclaimer such as one supplied by CA ANZ - “The information I have provided is purely factual in nature and does not take account of your personal objectives, situation or needs. The information is objectively ascertainable and, therefore, does not constitute financial product advice. If you require personal advice you should consult an appropriately licensed or authorised financial adviser”.
  • Help trustees articulate the investment decisions they have made using the correct terminology and language, and with sufficient detail to meet the ATO’s requirements.
  • Compare the fund’s documented investment strategy with the fund’s actual investments at appropriate intervals, and identify where the trustees might be investing outside their documented strategy.
  • Help trustees document the regular review of their strategy which may include helping the trustee to articulate a change in their strategy or confirm that no changes were required.

Don’t for SMSF investment strategies

  • Provide a recommendation for the trustee to make particular investments through their SMSF.
  • Advise the trustees on what the fund’s investment strategy should be (for example, what their target investment return should be and how to achieve this).
  • Provide a recommendation for the trustee to modify their investment strategy or investments.

Need more help?

The Heffron Super Toolkit’s Investment Strategy is a quick and easy-to-use guided tool which helps you give the trustees the information they need to articulate the “why” behind their investment decisions themselves. It is designed so you kick off the process by completing the fund’s factual information, then share it with the trustees to finalise and complete or simply review and confirm. Register for a demonstration or subscribe here: