One of trustee key responsibilities is managing your SMSF investments. The investment decisions should be designed to protect and increase members’ benefits for retirement. This is the sole purpose test of an existence of an SMSF. Let’s take a look on things that required in managing your SMSF:
SMSF Investment strategy
Every SMSF has to have a written investment strategy. This sets out your SMSF investment objectives and how you plan to achieve them. It takes into account the personal circumstances of all the fund members, including their age and risk tolerance. Your investment strategy will help you maintain the right mix of investments for your fund and its members.
The sole purpose test
The fund’s investments are for the sole purpose of providing retirement benefits to members – there can’t be any pre-retirement benefits to members or related parties (such as letting members use an investment asset).
Restrictions on investments
Being a trustee of an SMSF gives you the flexibility to choose the investments for your fund, but there are some restrictions on how you invest and what you can invest in. Make your investments on a commercial, ‘arm’s length’ basis and don’t buy assets from, or lend money to, fund members (or other related parties). Generally, your fund can’t borrow money.
Ownership and protection of assets
You need to manage your fund’s investments separately from the personal or business investments of members, including yourself. This includes ensuring that the fund has clear ownership of its investment assets.
Investing in collectables and personal use assets
From 1 July 2011, all collectables and personal use assets purchased by SMSFs will have to comply with tightened legislative standards.