Investors who have invested the bulk of their super fund in property may be contacted by the ATO at the end of this month and asked to review their investment strategy.
The ATO has announced that it will be writing to investors with self-managed super funds (SMSFs) who have more than 90 per cent of their super fund invested in one asset class, such as property.
This follows a report handed down by the Council of Financial Regulators in February this year which showed that 41 per cent of SMSFs with a loan held 90 per cent of their assets in a single asset class.
The report stated that due to the high purchase price of real property, this asset class often makes up a large proportion of the super fund’s portfolio, leading to a high level of asset concentration.
Using a loan to acquire the property, increased the risks further, it said.
ATO assistant commissioner Dana Fleming said it is very important that SMSF investors consider diversification in their fund and whether they have enough money in liquid investments to pay expenses and benefits.
The ATO will write to 17,700 SMSF investors at the end of this month where its records indicate that the SMSF holds 90 per cent or more in one asset or a single asset class.
It will be asking these trustees to review their investment strategy and clearly document the reasons behind the investment decisions.
“We’re concerned some trustees haven’t given due consideration to diversifying their fund’s investments; this can put the fund’s assets at risk,” it said.
“Lack of diversification or concentration risk, can expose the SMSF and its members to unnecessary risk if a significant investment fails.”