Many people prefer an SMSF to have control of investments. But what can an SMSF invest in? Investments such as term deposits, shares, property and managed funds are common place, but what of more exotic investments. What is allowed? Many SMSFs look at buying property even their business’ premises. There are rules around what you can buy and from whom you can buy it from. getting it right is important for many reasons.
So, one of your key responsibilities as a trustee is managing your fund’s investments. Your investment decisions should be designed to protect and increase your benefits for retirement. Here are some tips on investing Super fund money without breaking the rules.
Your best strategy in investing Super fund money
You invest according to your written investment strategy. This sets out your fund’s 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. Regularly reviewing your investment strategy will help you maintain the right mix of investments for your fund and its members.
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 do not buy assets from or lend money to fund members (or other related parties). Generally, your fund cannot 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 your own. This includes ensuring that the fund has clear ownership of its investment assets.
Sole purpose test
The fund’s investments are for the sole purpose of providing retirement benefits to members – there cannot be any pre-retirement benefits to members or related parties (such as letting members use an investment asset).
Investing in the unusual – artwork, collectables and personal-use assets
Since 1 July 2011, all collectables and personal-use assets purchased by SMSFs have to comply with tightened rules.