Written by Franco Morelli, Policy Manager, SMSF Association
In August 2019, when the ATO wrote to nearly 18,000 SMSF trustees about portfolio diversification, many in the industry thought the regulator was overstepping the mark. Now the ATO looks like a prophet.
As the SMSF Association conveyed at the time, the ATO was not trying to dictate how SMSFs should invest, but to simply ensure that SMSF trustees were aware of their legal obligations to have understood and documented how their investment strategy suited their retirement goals, and had considered the risks associated with inadequate diversification, liquidity of investments and the risk and return of their portfolios.
Few people could have predicted a global health pandemic, and even fewer could have predicted the resultant economic impacts. Despite the fact the ATO admitted its communication about who the letter was sent to could have been improved (it was originally stated that the letter was sent to all SMSFs with 90% of assets in a single asset class but this was later corrected to state that almost all letters were sent to trustees with limited recourse borrowing arrangements), the conversations that have occurred post receipt are now hopefully paying dividends (but more on that later).