Basic Rules for Trustees of an SMSF

Basic Rules for SMSF Trustees

Is a SMSF right for you?
Here are some basic guidelines for Trustees of an SMSF:

01

Build your SMSF Support Team

You'll need an Accountant, an SMSF Auditor, a Financial Advisor, and possibly a Lawyer who can work together to support the Trustee of the SMSF.

02

Get your Personal Estate Planning in Place Now

Get your own financial house in order and establish your Will, Power of Attorney and Power of Enduring Guardianship documents.

03

Get to Know The Rules for Managing your SMSF

The ATO has useful information and instructional videos to assist Trustees of SMSFs you can see here.

04

Create your Investment Plan and Work on a Strategy

The ATO states, ‘SMSFs are required to prepare and implement an investment strategy to help meet their investment and retirement goals. The investment strategy is not designed to be a 'set and forget’ document but rather a strategy you continuously review to ensure you are meeting your retirement plans.’

05

Maintain the Liquidity Needs of your SMSF

The Trustee of an SMSF is required to regularly consider the liquidity needs of the fund and its members. As the purpose of your SMSF is to build up a pool of assets to sustain your lifestyle throughout your retirement, if the fund’s assets are primarily held in property, being a bulky assets, this may not give you the required liquidity.

06

Document your Decisions, Meetings & Strategy Reviews

Your SMSF Auditor will need to ‘evidence you are running a complying SMSF’ and this will require documentary evidence to support your good decisions.

07

Plan Ahead for the future transfer from the Accumulation Phase to the Pension Phase

Understand how ‘lumpy’ (relatively illiquid) assets may affect the funds ability to make the annual minimum drawdown each year in pension phase, to maintain the funds tax-exempt status, so a strategy to manage this phase will be needed ahead of time.

08

Stay Connected to Good Advice

The SMSF legislative environment continues to change and develop so Trustees of an SMSF need a way to maintain their knowledge of key changes and requirements. This is where building a long-term relationship with your advice team contributes significant value to your SMSF strategy.


Fixed Business Expenses Insurance OR Key Person Replacement Insurance explained

hand with chalk plotting out a sports strategy on a chalk board

What is an Investment Strategy in SMSF?

All Self-Managed Superannuation Funds, (SMSF's) are required to have a written investment strategy. An Investment Strategy is a plan for making and holding the Self-Managed Super Fund’s assets and helps the trustee make decisions on how they are going to invest for the best interests of the members.

The investment strategy starts with the investment objectives and then outlines the parameters for the investments, usually including an asset allocation percentage.

An appropriate investment strategy will take into account a range of matters including:

  • Investment Risk vs Return
  • Liquidity Risk and Response (the plan for how easily and quickly the assets can be converted to cash)
  • Diversification
  • The fund's ability to discharge liabilities as they fall due
  • Insurance needs of the members
  • Whether investing in property is consistent with the investment strategy and risk profile of the SMSF

The strategy should explain how the fund’s investments meet each member’s retirement objectives.

An investment strategy would also need to explain the reasoning and strategy as to why a fund had allocated a significant portion of its funds to an illiquid asset if it had very few other investments.

The investment strategy should be based on the objectives, needs, and preferences of each individual SMSF member taking into consideration their age, their retirement needs, and their attitude towards risk and volatility.

The One Constant is Change

As circumstances change, it is important the Investment Strategy is reviewed and updated at least annually, and the associated documented Minutes are your evidence of this.

Superannuation and Pension laws can change from year to year as much as investment performance rises and falls due to local and global markets.

  • Life and Investment circumstances do not stay the same from year to year so develop your habit of regularly revising your SMSF member's needs and investment strategy, documenting your decisions, and making sure these documents are minuted and made available for your SMSF Auditor, so they can ‘evidence the activities taken in compliance with the legislation.

Pro Tip: Sapience Financial can help you ensure your Investment Strategy is fully compliant with Commonwealth legislation, contains Minutes for the Self-Managed Super Fund to adopt the Investment Strategy, as well as a letter from a law firm confirming the Investment Strategy is compliant.

How we can help

Having a documented and legally compliant investment strategy for your SMSF and making sure the fund's liquidity enables it to meet the retirement needs of its members, is a key part of providing for yourself and your family into retirement, while you plan to increase your investment returns to sustain the financial needs of your retirement.

Contact us for a confidential chat about your SMSF needs.

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