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SMSF investment strategies

An SMSF investment strategy is not a “nice to have”. Under Australian super rules, trustees are expected to have a written strategy, review it regularly, and actually invest the fund in line with it.

What is an SMSF investment strategy?

In plain English: your fund’s documented plan for why you invest the way you do, and how it supports members’ retirement goals.

What the ATO expects you to consider

  • Risk and likely return, in light of the fund’s objectives and cashflow needs.
  • Asset mix (composition) and diversification (or clear reasons if the fund is concentrated).
  • Liquidity — can the fund pay expenses and member benefits when due?
  • Ability to meet liabilities (existing and future).
  • Whether insurance for members should be held via the fund.

These factors line up with the SIS investment strategy rules (see SISR 4.09) and ATO guidance.

What it is not

  • A generic template with no link to what the fund actually owns.
  • A document you sign once and never revisit.
  • An excuse to do high-risk or related-party investing without evidence and compliance checks.
Tell it like it is: the auditor will compare your strategy to your actual holdings. If they don’t match, you’ll get questions.

Why it matters

A good strategy keeps you compliant and reduces avoidable risk.

Audit-ready

Clean decisions + clear documentation usually means fewer audit queries and faster year-end sign-off.

Risk control

For most SMSFs, the biggest risk is concentration (one asset class or one asset). A strategy forces you to address that upfront.

Better trustee decisions

It keeps the fund focused on retirement outcomes, not short-term noise or “hot tips”.

Diversification: what “good” looks like
Diversification doesn’t mean you need 20 investments. It means you have thought about concentration risk and documented how you manage it. If the fund is intentionally concentrated (for example, property-heavy), you should be able to explain why, how liquidity is managed, and how member needs are met.

Common pitfalls (and what to do instead)

These are the issues that most often cause audit friction or compliance risk.

Pitfalls we see often

  • Strategy says “diversified”, but the fund is effectively one asset (or one sector).
  • No liquidity planning (especially where pensions are being paid or property is held).
  • No documented review when circumstances change (retirement, starting pensions, major contribution changes).
  • Related-party transactions without proper evidence, commercial terms, and documentation.
  • Valuations not supported (property/unlisted assets are common trouble spots).

Best practice approach

  • Write the strategy in your words and link it to the actual portfolio.
  • Document concentration risk and how you manage it (or why it’s appropriate).
  • Minute the review at least annually and when there’s a material change.
  • Keep evidence of decisions (minutes) and keep transactions on an arm’s-length basis.
  • Keep valuation support ready at year-end (not the week before lodgement).
A strategy that is outdated or inconsistent with the fund’s holdings is one of the easiest ways to attract audit queries.

A practical strategy framework (simple but defensible)

This is a client-friendly structure that usually satisfies the “why” and the “how”.

1) Objectives and time horizon

  • Member retirement timeframe(s)
  • Expected contributions and pension payments
  • Target return (broadly, not marketing language)

2) Risk and diversification

  • Risk tolerance and what “downside” looks like for members
  • Asset allocation ranges (e.g., cash / fixed interest / equities / property)
  • Concentration risks and mitigations

3) Liquidity and liabilities

  • How the fund will pay expenses, tax, and pensions
  • Cash buffers and expected cashflow needs
  • Approach if a major asset is illiquid (e.g., property)

4) Insurance decision

  • Whether member insurance is needed
  • Whether insurance is held inside or outside super
  • Document the decision and review periodically
Minutes: what should be recorded
Minutes are your audit trail. At minimum, minute: annual strategy review, major purchases/sales, pension commencement/commutations, significant changes to liquidity planning, and any related-party dealings.

Best-practice checklists

If you want fewer audit issues, this is the routine that works.

Annual strategy review checklist

Quarterly admin checklist

The easiest way to “win” SMSF compliance is boring consistency: regular review, tidy minutes, and clean support for valuations and transactions.

Case studies (good and bad)

Same type of fund. Different habits. Very different outcomes at audit time.
Best practiceGood case study: “Concentrated — but documented and managed”

An SMSF holds a large property position. The trustees acknowledge concentration risk in the strategy, document why it suits their time horizon, and maintain a clear liquidity plan (cash buffers, timing of expenses, and how pensions will be funded).

They review the strategy annually and minute the review. Property valuation evidence is obtained at year-end and filed.

Outcome: the auditor can see the logic and the controls, and the fund moves through audit smoothly.

Avoid thisBad case study: “Strategy says diversified, reality says one stock”

An SMSF holds almost entirely one high-volatility investment. The strategy is a generic template saying “diversified” and “low risk”, with no explanation, no liquidity planning, and no documented review for years.

The auditor queries inconsistencies and asks for evidence of strategy review and risk management. The year-end process stalls until records are fixed.

Outcome: delays, extra fees, and unnecessary compliance risk.

Important: investment strategy compliance is one thing; choosing specific investments is another. If you need product-level advice, you may also need a licensed financial adviser.

ATO guidance and resources

These are the official Australian sources we recommend as starting points.

General information only. This page is not legal, tax or financial advice and does not consider your specific circumstances.

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