SMSF investment strategy: what the rules require, with examples

The six things your strategy must address

Section 52B(2) of the SIS Act and regulation 4.09 set out what trustees must consider. In plain terms: the fund's investment objectives; the risk of making, holding and realising the fund's investments (and how that fits the members' ages and retirement needs); the likely return; the composition of investments as a whole — the diversification requirement; the liquidity of the investments and the fund's ability to pay benefits, tax and expenses when they fall due; and whether the fund should hold insurance (life, TPD or income protection) for each member.

None of these force you into a particular portfolio. The ATO's position is that the document must show the trustees genuinely considered each factor for these members — not that you picked any particular asset mix. That's why a generic download with 0%–100% against every asset class fails: it demonstrates no consideration at all.

Ranged allocations are the practical answer. A strategy that says 'Australian listed shares 20%–50%, cash 10%–30%' gives you room to make decisions without rewriting the document, while still being a real constraint the auditor can test the fund's actual portfolio against.

Concentrated funds need more words, not fewer. If your fund exists to hold one property, or mostly Bitcoin on a supported Australian exchange, the strategy must acknowledge the concentration and explain why it's appropriate: the risk accepted, the liquidity plan for paying expenses and pensions, and how the position fits the members' time horizon. A well-argued concentrated strategy is compliant; a silent one is not.

The strategy, the trust deed and the law work in layers. The SIS Act sets the outer bounds (sole purpose test, in-house asset limits, arm's-length dealings); the deed permits or forbids asset types (if the deed is silent on digital assets or borrowing, that asset may be off-limits regardless of what the strategy says); and the strategy is your own documented plan inside those bounds. When we set up a fund we make sure all three line up.

Finally: review it. At least annually, and on any material event — a member joining or leaving, a pension commencing, a large rollover, a member's death, or the portfolio drifting outside its ranges. A trustee minute recording the review is the evidence. easySMSF prompts the annual review as part of your fixed-fee administration, and the documentation goes to the independent auditor we arrange for the fund each year.

• Required by law: s52B SIS Act — every SMSF, every year
• Six mandatory considerations: objectives, risk, return, diversification, liquidity, insurance
• Use ranged allocations (e.g. shares 20%–50%), never blanket 0%–100%
• Concentrated portfolios are allowed if the strategy acknowledges and justifies them
• Review at least annually and on material events — minute every review
• The independent auditor checks the fund operated within its strategy each year
• Deed and strategy must align — the strategy can't permit what the deed forbids
• Breaches are reportable: Auditor Contravention Report plus ATO penalties per trustee