About SMSF investing
Investments you make for your self-managed super fund (SMSF) must be in accordance with your fund's trust deed and superannuation laws.
Super laws require you to prepare an investment strategy for your SMSF, which is your plan for making, holding and realising assets. It should set out why and how you’ve chosen assets to meet your fund's investment objectives and members' retirement goals.
There are investment requirements that trustees must follow. Your investments must:
- meet the sole purpose test
- be made on a commercial arm's length basis and always reflect true market value
- show clear legal ownership by the fund
- meet specific restrictions on investments.
Sole purpose test
Any investment your SMSF makes needs to be made and maintained for the sole purpose of providing retirement benefits to your members, or to pay death benefits if a member dies before retirement.
A contravention of one or more of the super laws may indicate that there has been a breach of the sole purpose test. This can include if you or a related party obtains more than an incidental personal financial benefit when making investments, for example:
- if the asset provides a pre-retirement benefit to a related party, such as holidaying in your SMSF investment property
- if you or a related party receive a personal reward when investing your fund's assets in a particular investment group
- if the fund invests in collectables such as art or wine, and a trustee, member or related party displays or stores these assets in their private residence.
A contravention will occur if your investments do not meet the sole purpose test. This means your SMSF will not be eligible for tax concessions and the trustees of the SMSF could face a range of compliance actions such as penalties.
Additional support
You need financial and legal knowledge and skills to manage your SMSF investments.
Before making any decisions about investments, consider getting help from a licensed financial advisor or SMSF professional.
You can also request SMSF specific advice to understand how superannuation law applies to a particular transaction or arrangement.