Every Self-Managed Super Fund must have a written investment strategy. This is a legal requirement under the Superannuation Industry (Supervision) Act 1993 (SIS Act), and the ATO checks for compliance at annual audit. An SMSF without a documented, properly considered investment strategy is non-compliant.
What Is an SMSF Investment Strategy?
An investment strategy is a written document that records how the trustees have decided to invest the fund’s assets to achieve its objectives. It is not just a list of current holdings — it is evidence that the trustees have genuinely turned their minds to the fund’s investment approach.
The strategy must be:
- In writing — oral agreement is not sufficient
- Considered — reflecting genuine deliberation by the trustees, not just a boilerplate template
- Reviewed regularly — the ATO expects annual review as a minimum; review when circumstances change
- Signed by all trustees or directors of the corporate trustee
What Must the Investment Strategy Cover?
The SIS Act (Regulation 4.09) requires the investment strategy to consider:
1. Risk and return The likely return, risk, and cash flow requirements of the fund’s investments. The strategy should discuss the risk profile of the investment mix and whether it is appropriate for the fund’s circumstances.
2. Diversification The extent to which the investments are diversified, and the risks of not diversifying. If the fund holds a concentration of assets (e.g. 80% in a single property), the strategy must address why this is appropriate for the fund’s members.
3. Liquidity Whether the fund will have sufficient liquid assets to meet its liabilities as they fall due — including minimum pension payments, lump sum withdrawals requested by members, and expenses. A fund that is mostly illiquid (e.g. property-heavy) must address how it will meet cash obligations.
4. Members’ circumstances The age, the number of years to retirement, and the needs of each member at retirement. A fund with a 35-year-old member and a 65-year-old in pension phase has very different needs — the strategy should reflect this.
5. Insurance Whether the trustees have considered the insurance needs of each member. This does not require taking out insurance — it requires the trustees to have considered whether life cover, TPD cover, or income protection is appropriate and why they have or have not taken it.
What Happens If Trustees Ignore the Investment Strategy?
The ATO can issue a trustee with a contravention notice if an investment strategy does not exist or is clearly inadequate. Common issues the ATO flags:
- Holding more than 90% in a single asset class with no documented reasoning
- Generic, boilerplate strategies that don’t reflect the fund’s actual investments
- Undated or unsigned strategy documents
- No review record when the fund’s circumstances have changed materially (e.g. a member has begun drawing a pension)
Penalties for non-compliance with investment strategy requirements can include administrative penalties per trustee.
Practical Tips for Documenting the Investment Strategy
Tailor to the fund, not a template: Many accounting practices provide template investment strategies. While these are a starting point, the strategy should be customised to reflect:
- The actual assets held (or planned)
- The specific members’ ages, retirement timelines, and pension phase status
- The fund’s liquidity position
- Why any concentrated positions are appropriate
Review annually: The simplest approach is to review at year-end as part of the SMSF annual return process. Document the review — note the date, who reviewed, and any changes made (or a record that no changes were needed).
Trigger reviews when circumstances change: Significant events — a member starting a pension, a major investment being acquired or sold, a member’s health changing — should each prompt a review of the strategy.
Insurance section: Explicitly document the trustees’ consideration of each member’s insurance needs. Even if the conclusion is “no insurance required — member has adequate cover via personal policy held outside the fund”, document it.
Does the Strategy Have to Match Current Holdings?
Not exactly — but there must be a reasonable relationship between the strategy and what the fund actually holds. If the strategy says “the fund will invest in ASX shares and cash” but the fund’s only asset is a residential property, the strategy is not compliant.
When the fund is acquiring new types of assets, the investment strategy should be reviewed and updated before the acquisition — not after.
Investment Strategy vs Investment Menu
An SMSF investment strategy is not the same as the investment menu of an industry fund. In an SMSF, the trustees can invest in anything permitted by the SIS Act and the fund’s trust deed, as long as the investment strategy permits it. The strategy effectively sets the parameters within which the trustees operate.
Frequently Asked Questions
Do I need a financial adviser to write my investment strategy? No — trustees can write their own investment strategy. However, it must genuinely comply with the SIS Act requirements. Many SMSF accountants and administrators can assist with drafting a compliant strategy as part of their service. For funds with complex or concentrated holdings, adviser input is prudent.
How long should an SMSF investment strategy be? There is no mandated length. A simple fund’s strategy might be 2–4 pages. A complex fund with multiple members in different phases, an LRBA, and cryptocurrency holdings might need more detail. Quality and accuracy matters more than length.
Our fund only has one member — do we still need an investment strategy? Yes. All SMSFs — regardless of the number of members — must have a documented investment strategy.
See also: Self-Managed Super Funds. For further guidance, see the ATO’s investment strategy requirements or consult a licensed SMSF adviser or registered tax agent.