Providing members retirement benefits are the only reason a Self Managed Super Fund can be established. Sadly, if, a member dies before exhausting their benefits, the benefit may be paid to a dependent. This is non negotiable and is referred to as the Sole Purpose Test.
SMSF Investment Strategy
SMSF trustees are responsible for the fund. Their duties require preparing and implementing and investment strategy for their fund. The plan must be regularly reviewed.
The Investment strategy should address the purpose of the SMSF. It must also provide sufficient returns to provide benefits to the members. It’s important to think of retirement as a long term strategy. To be successful the fund should consider multiple asset classes, including both Australian and International listed shares along with other investment options like direct property and fixed interest. You may consider buying Gold
, Residential investment property
, commercial real estate
, fine wine investments
and other alternatives
. These choices must be tempered by the ages, incomes, employment and retirement needs of the SMSF members.
Trustees investment decisions must follow the guidelines according to the SMSF’s investment strategy.
SMSF Investment Objectives
Remember the sole purpose of a SMSF is to pay out benefits to the members upon their retirement, or in the event of death of a member their dependents.
Investments that help achieve this goal must fall within the guidelines of your SMSF’s investment objectives.
If the Fund disregards the strategy investing into assets that differ fro the objective, the fund could become non-compliant, as well as incurring other penalties.
The arm’s length rule
SMSF trustees are required to be honest. They must ensure all transactions are managed on the basis of fair market value and purchased at a arm’s length. One way it’s determined to be an arm’s length transaction is acceptable is to show a reasonable prudent person acting on their own behalf might make the same transaction.
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