ATO letter on diversification of assets

SMSFs are beneficial for so many reasons including control, choice, flexibility and a concessional tax rate. I hope your SMSF is treating you well and you’re kicking goals and that you’re partnership with Redwood is also kicking goals.

However, you may have received the fright of your life with a “threatening” letter from the ATO on diversification of assets. Lets try to calm the situation and find a resolution in this blog. If you have not received a letter, be free to continue reading.

Background

In August 2019, the ATO announced a project to focus on diversification of SMSF assets, particularly focused on SMSFs with a high percentage of their assets invested in Bitcoin or Direct Property. The focus is on compliance with Superannuation Law specifically the diversification of assets and where a fund may have more than 90% of their assets invested in one asset class. This letter was issued to over 17,000 SMSF’s, so you are not alone.

What can you do?

Firstly, don’t be alarmed, the letter does not say you are non-complying are a going to be fined $4000, it is stating the steps that need to take place to ensure you clearly document your investment strategy – and reasoning for your investments to stand up from scrutiny from your SMSF auditor and the ATO.

The best thing you can do is to contact Redwood to get a simple explanation and reduce your heartbeat. After that, Redwood will assist you to review your investment strategy to ensure you consider your asset allocation and specifically tailor the asset allocation to your investment mix. Further, to stand up to scrutiny, you should detail your reasoning and understanding of risk. Further you should detail consideration of insurance in the SMSF. This is not financial advice, if you require personalised investment advice please contact our office to develop a financial plan.

A copy of a template investment strategy can be found here – refer the last paragraph of the article.

Ivan Filipovic is a leading SMSF Specialist Advisor with Redwood. Ivan is a Self Managed Superannuation Specialist with over 20 years provides a range of services across all sectors of Self Managed Superannuation, Property and Finance with an emphasis on long term wealth strategies. Ivan is a Chartered Accountant, Financial Planner,  ASIC registered auditor, Mortgage Broker, Tax Agent and Licensed Property Professional.  

Disclaimer – The content has been prepared by Redwood Wealth Pty Ltd & Redwood Advisory Pty Ltd without taking account of the objectives, financial situation or needs of a particular individual and does not constitute financial product advice. This article should not be considered personal financial advice as it is intended to provide factual information only. 

Ivan Filipovic is an authorised representative of First Mutual (AFSL 423710). Redwood Wealth is a Corporate Authorised Representative of First Mutual (1244359)