An investment strategy is fundamental when it comes to self-managed super funds. Not only is having one a statutory requirement, but it also helps SMSF trustees know what to invest in to meet the fund’s investment goal.
Above all, an SMSF investment strategy must be designed to help trustees reach their retirement goal.
To do this, the strategy must outline the fund’s objectives. Every fund’s objective will be different and should reflect the circumstances of each fund member. For example, it must take into account the age and when each member plans to retire, existing assets inside and outside of super, each member’s current and future salary and ability to contribute to the fund. Importantly, it must also factor the ability of the fund’s assets to be sold within a specific time frame.
Taking into account the risk profile of each fund member will help the strategy determine what the fund invests in. In cases where the risk profile of each member differs, individual asset pools should be created to reflect individual members’ risk preferences.
SMSF strategies need to be reviewed regularly, especially during important life events, like when a member enters retirement, suffers from an illness, goes through a divorce or passes away. These events can have a substantial effect on how a fund operates e.g. if a member dies, a fund’s asset allocation may need to change so that the fund holds fewer high-risk assets.
While there is no such thing as a ‘one size fits all approach’ when it comes to an SMSF’s investment strategy, it is essential for a strategy to consider the elements such as the ones discussed to ensure the fund complies with regulations and meets member needs in retirement.
Managing a trust comes with its share of responsibilities, especially regarding tax compliance.
To assist trustees and administrators, the ATO has provided a checklist that can be used to streamline the tax process. This is a crucial tool for ensuring that the trust’s affairs are managed efficiently and effectively in accordance with tax regulations.
Let’s delve deeper into what the Resolutions Checklist entails:
Distribution Resolutions: One of the primary tasks is to determine how income will be distributed among beneficiaries for the financial year. This resolution must be documented and finalised before 30 June to optimise tax outcomes for the trust and its beneficiaries. Trustees must consider each beneficiary’s tax position and financial circumstances when making distribution decisions.
Trustee Resolutions: Trustee decisions throughout the year, such as acquisitions or disposals of trust assets, loan agreements, or changes to the trust deed, need to be documented and ratified through resolutions. These resolutions serve as formal acknowledgments of the decisions made by the trustees and provide a clear record of the trust’s activities.
Trust Income Allocation: Trust income comprises various components, including assessable income, exempt income, and deductions. Trustees must accurately determine and record each component to ensure compliance with tax laws. Proper recording and reporting of income and expenses are essential for tax purposes and may impact the tax liabilities of both the trust and its beneficiaries.
Capital Gains Tax (CGT) Considerations: Trustees must review any CGT events during the year and determine the distribution of capital gains or losses among beneficiaries. CGT decisions can significantly affect the tax outcomes for both the trust and its beneficiaries, making careful consideration and documentation are essential.
Streaming Resolutions: Some trust deeds allow for income streaming, which involves allocating specific types of income to beneficiaries based on their individual tax preferences or circumstances. Trustees need to make resolutions to implement income streaming effectively, considering the trust deed provisions and tax implications.
Minutes and Records: All trustee resolutions and decisions must be documented in writing, including minutes of meetings and any supporting documentation. Proper record-keeping is crucial for demonstrating compliance with tax regulations and providing an audit trail of the trust’s activities.
Trust Deed Review and Update: Regular review and, if necessary, updating of the trust deed are essential to ensure that it remains compliant with current laws and regulations. Trust deeds should accurately reflect the intentions of the trustees and beneficiaries and provide a solid legal foundation for the trust’s operations.
Trustees can streamline the tax compliance process and minimise the risk of errors or oversights.
However, seeking professional advice is essential if you’re unsure about any aspect of trust management or tax obligations. With proper planning, documentation, and compliance, trustees can ensure that their trusts operate smoothly and remain compliant with tax laws.
Why not start a conversation with us today to find out how we could assist you with your trust documentation?
