SMSF Investment Strategy Template 2025: Complete ATO-Compliant Guide

What is an SMSF Investment Strategy?

An SMSF investment strategy is a written plan that outlines how your self-managed superannuation fund will invest to meet the retirement goals of its members. It's not just a compliance document—it's your roadmap for making investment decisions that align with your fund's objectives and members' needs.

Think of it as your fund's investment blueprint. It documents your approach to:

• Investment objectives: What you're trying to achieve (e.g., capital growth, income generation, capital preservation)
• Risk tolerance: How much investment risk you're willing to accept
• Asset allocation: How you'll divide investments across different asset classes
• Diversification: How you'll spread risk across different investments
• Liquidity: Ensuring you have enough cash to meet expenses and benefit payments
• Insurance: Whether members need life insurance, TPD, or income protection

Under Section 52B(2)(f) of the Superannuation Industry (Supervision) Act 1993 (SIS Act), every SMSF must have a written investment strategy that considers these factors. This isn't optional—it's a fundamental trustee duty.

Legal Requirements & Penalties

What the Law Requires

The SIS Act requires that your SMSF investment strategy must:

1. Be in writing: Verbal agreements or mental notes don't count
2. Be formulated before making investments: You can't invest first and create the strategy later
3. Give effect to the fund's investment objectives: Your actual investments must align with the strategy
4. Consider risk and return: Document your approach to balancing these factors
5. Address diversification: Explain how you'll spread risk (or justify concentrated holdings)
6. Consider liquidity: Ensure you can meet expenses and benefit payments
7. Consider insurance needs: Document whether members need insurance through the fund
8. Be reviewed regularly: At least annually, and when circumstances change

Penalties for Non-Compliance

Failing to maintain a current, appropriate investment strategy can result in serious consequences:

Penalty Type	Amount/Impact	When Applied
Administrative Penalty	Up to $13,320 per trustee	No strategy or strategy not reviewed
Audit Qualification	Reported to ATO	Strategy doesn't meet requirements
Rectification Direction	Must fix within timeframe	ATO identifies non-compliance
Trustee Disqualification	Removed as trustee	Serious or repeated breaches
Loss of Complying Status	Tax rate increases from 15% to 45%	Severe breaches of SIS Act

Step-by-Step Guide to Creating Your Strategy

Creating an effective SMSF investment strategy doesn't have to be complicated. Follow these eight steps to build a compliant, practical strategy for your fund.

Step 1: Document Fund Details

Start with the basics. Your strategy should include:

• SMSF name and ABN
• Names of all trustees (or directors if corporate trustee)
• Names and ages of all members
• Current fund balance and each member's balance
• Date the strategy was prepared

This information provides context for all the decisions that follow. For example, a fund with members aged 30 and 32 will have a very different strategy than one with members aged 62 and 65.

Step 2: Define Investment Objectives

What is your fund trying to achieve? Common objectives include:

• Capital growth: Increasing the fund's value over time (typical for younger members)
• Income generation: Producing regular income from investments (common in pension phase)
• Capital preservation: Protecting the fund's value (appropriate near or in retirement)
• Balanced approach: Combination of growth and income

Your objectives should reflect:

• Members' ages and time until retirement
• Whether the fund is in accumulation or pension phase
• Members' risk tolerance
• External income sources (employment, other investments)

Step 3: Set Asset Allocation

Decide how you'll divide investments across asset classes. Use ranges rather than exact percentages to allow flexibility:

Asset Class	Conservative	Balanced	Growth
Australian Shares	10-20%	25-35%	35-50%
International Shares	5-15%	15-25%	25-35%
Property	5-15%	10-20%	10-20%
Fixed Income	30-40%	15-25%	5-15%
Cash	20-30%	10-20%	5-10%

Your asset allocation should align with your investment objectives and risk tolerance. Document why you've chosen these allocations based on your members' circumstances.

Step 4: Address Risk and Diversification

Explain how you'll manage investment risk. Consider:

• Asset class diversification: Spreading across shares, property, fixed income, cash
• Geographic diversification: Australian vs international investments
• Sector diversification: Different industries and sectors
• Investment vehicle diversification: Direct shares, managed funds, ETFs, property

If you're not diversifying (e.g., holding a single property), you must document valid reasons why this approach suits your fund's circumstances.

Step 5: Consider Liquidity Requirements

Ensure your fund has sufficient liquid assets to meet:

• Minimum pension payments: If members are in pension phase (4-14% depending on age)
• Annual expenses: Administration fees, audit fees, investment fees, insurance premiums
• Potential benefit payments: If a member leaves employment or reaches preservation age
• Tax obligations: Income tax, capital gains tax
• Unexpected expenses: Property maintenance, legal fees

A common rule of thumb is maintaining 12-24 months of expected expenses in liquid assets (cash, term deposits, listed shares that can be sold quickly).

Step 6: Review Insurance Needs

Consider whether members need insurance through the fund:

• Life insurance: Provides lump sum on death
• Total and Permanent Disability (TPD): Pays if member can't work again
• Income protection: Replaces income if member can't work temporarily

Your strategy should document:

• Whether members have insurance through the fund
• Types and amounts of cover
• How premiums will be paid (from member accounts or fund assets)
• Why insurance is or isn't appropriate for each member

Many SMSFs choose not to hold insurance due to cost or because members have adequate cover elsewhere. This is fine, but document the decision.

Step 7: Document and Sign

Once you've addressed all required elements:

1. Write the strategy in a clear, structured document
2. Include the date it was prepared
3. Have all trustees sign and date the document
4. Store it with your fund's records
5. Provide a copy to your auditor

If you have a corporate trustee, all directors must sign. The strategy should be a formal trustee resolution.

Step 8: Schedule Annual Review

Set a reminder to review your strategy at least annually. During each review:

• Check if member circumstances have changed
• Review fund performance against objectives
• Assess whether asset allocation remains appropriate
• Consider market conditions and economic outlook
• Update the strategy if needed
• Document the review date and any changes
• Have all trustees sign the reviewed strategy

Free SMSF Investment Strategy Template

While we strongly recommend using our interactive builder (which guides you through each section with personalized questions), here's a basic template structure you can adapt:

Template Structure

Common Mistakes to Avoid

1. Using a Generic Template Without Customization

The ATO specifically warns against this. Your strategy must reflect your fund's actual circumstances, not a one-size-fits-all template. Auditors can spot generic templates immediately.

Fix: Customize every section with your specific details, ages, balances, and investment approach.

2. Not Reviewing Annually

Many trustees create a strategy once and forget about it. This is a compliance breach even if nothing has changed.

Fix: Set a calendar reminder for annual reviews. Document each review with the date and signatures, even if no changes are made.

3. Investments Don't Match the Strategy

If your strategy says you'll invest 30-40% in Australian shares but you actually have 70%, you're in breach.

Fix: Either adjust your investments to match the strategy, or update the strategy first (with documented reasons), then make the investment changes.

4. No Consideration of Liquidity

Investing 100% in illiquid assets (like a single property) without addressing how you'll meet expenses is a major red flag.

Fix: Document your liquidity needs and ensure sufficient liquid assets, or explain how you'll meet obligations (e.g., rental income from property).

5. Ignoring Changed Circumstances

If a member retires, gets divorced, or receives a large inheritance, your strategy should be reviewed and potentially updated.

Fix: Review your strategy whenever significant changes occur, not just annually.

6. No Insurance Consideration

Your strategy must address insurance, even if you decide not to hold it.

Fix: Document why insurance is or isn't appropriate for each member. "Not considered" is not acceptable.

7. Vague or Unclear Language

Strategies that say "invest in various assets" or "maintain appropriate diversification" without specifics don't meet requirements.

Fix: Be specific. Use percentage ranges, timeframes, and clear descriptions of your approach.

8. No Risk Assessment

Your strategy must address how you'll manage investment risk, not just what you'll invest in.

Fix: Document your risk tolerance, how you'll diversify, and how you'll monitor and manage risk.

9. Retrospective Updates

Updating your strategy after making investments to justify what you've already done is a breach.

Fix: Always update your strategy first, then make investment changes. Document the date of strategy updates.

10. No Trustee Signatures

An unsigned strategy isn't worth the paper it's printed on.

Fix: Ensure all trustees sign and date the strategy and every review.

Real-World Examples

Example 1: Young Couple, Growth Focus

Example 2: Pre-Retirement Couple, Balanced Approach

Example 3: Retired Couple, Income Focus

How to Review Your Investment Strategy

Regular reviews are a legal requirement and good practice. Here's how to conduct an effective annual review:

Review Checklist

1. Member Circumstances
   • Have any members retired or changed employment?
   • Have there been significant life events (marriage, divorce, death)?
   • Have members' risk tolerances changed?
   • Are retirement timelines still accurate?
2. Fund Performance
   • Has the fund met its return objectives?
   • Is the current asset allocation within target ranges?
   • Have any investments underperformed significantly?
   • Is diversification still appropriate?
3. Liquidity Assessment
   • Does the fund have sufficient cash for upcoming expenses?
   • Are pension payments being met comfortably?
   • Are any large expenses expected (property purchase, benefit payments)?
4. Market Conditions
   • Have market conditions changed significantly?
   • Are there new investment opportunities or risks?
   • Should asset allocation be adjusted for current environment?
5. Regulatory Changes
   • Have there been changes to super laws or contribution caps?
   • Are there new compliance requirements?
   • Has the Transfer Balance Cap changed?
6. Insurance Review
   • Is insurance cover still appropriate?
   • Have premiums changed significantly?
   • Should cover amounts be adjusted?

Documenting Your Review

After completing your review, document:

• Date of review: When the review was conducted
• Who conducted it: Names of all trustees involved
• What was reviewed: Checklist of items considered
• Findings: Summary of what you found
• Changes made: Any updates to the strategy (or note "no changes required")
• Reasons: Why changes were made or why no changes were needed
• Signatures: All trustees sign and date the review documentation

When to Review Outside Annual Schedule

Review your strategy immediately if:

• A member retires or changes employment status
• A member gets married, divorced, or has a child
• A member dies
• Large contribution or rollover received (>$100,000)
• Planning to make a large investment (e.g., property purchase)
• Significant market event (e.g., 2020 COVID crash)
• Major change to super laws
• Member requests a benefit payment

Frequently Asked Questions