Does Your SMSF Investment Strategy Actually Meet ATO Expectations?
Every SMSF is already legally required to formulate, regularly review and give effect to an investment strategy that considers risk and return, diversification, liquidity, the fund's ability to meet its liabilities, and whether to hold insurance for members.
That requirement isn't new and isn't changing.
What's changing is when the document has to exist and how closely its quality gets examined. Under reforms announced in August 2026, new SMSFs will need a written investment strategy upfront, and the Government will consult on options to uplift the quality of strategies generally.
The practical test is simple: could your trustees explain, without reading the document, why the fund is invested the way it is?
If not, you have a compliance artefact, not a strategy
The problem isn't missing documents. It's the order they're written in.
Almost every SMSF has an investment strategy on file. The auditor requires one, so one exists.
The issue is sequencing. In a lot of funds, the process runs like this: the SMSF is established, balances are rolled in, investments are made — and then a strategy document is prepared, because the compliance file needs one before the audit.
At that point the strategy isn't guiding anything. It's a description of decisions already taken, written in language broad enough to cover them.
Asset ranges of 0–100% do exactly this job: they can't be breached, so they never require a trustee to think again.
That's the wrong way around, and it's the specific behaviour the proposed reforms are aimed at.
What the law actually requires for your SMSF Investment Strategy
Under superannuation law, trustees must formulate, regularly review and give effect to an investment strategy that has regard to the whole circumstances of the fund, including:
Risk and likely return — the risk involved in making, holding and realising the fund's investments, and the likely return, having regard to the fund's objectives and expected cash flow requirements
Diversification — the composition of the fund's investments as a whole, including the extent to which they're diverse or exposed to risks from inadequate diversification
Liquidity — the fund's ability to discharge existing and prospective liabilities as they fall due
Insurance — whether to hold insurance cover for one or more members
Note that diversification is a matter to consider, not a rule to comply with. A concentrated fund isn't automatically non-compliant. A concentrated fund whose trustees have never articulated why the concentration is appropriate is a different matter.
The ATO's own guidance for people setting up an SMSF already places the investment strategy in the establishment process, not after it. So the idea that the strategy should come before the investing isn't a new concept — the reform reinforces when it should happen and what role it should play.
What the August 2026 reforms would change
Two of the announced measures touch this directly:
A written investment strategy upfront.
For new SMSFs, the strategy would need to exist before the fund is running. For a well-run establishment, this formalises what should already happen.
The open question is how it gets verified. An SMSF's investment strategy isn't currently submitted to the ATO for approval — it sits in the fund's records and is examined at the annual audit, well after the money has moved.
If the point of the reform is protection before retirement savings are rolled in, then the mechanism matters: a trustee declaration, a step tied to registration or first rollover, or continued verification after the fact. That detail hasn't been announced.
Consultation on "uplifting the quality" of investment strategies.
This is the more significant one for existing trustees, and it's a single word doing a lot of work. Having an investment strategy and having a meaningful investment strategy aren't the same thing.
Questions worth watching as consultation develops:
What will a higher-quality strategy be expected to demonstrate?
Will there be greater emphasis on documenting why particular investments are appropriate?
Will generic 0–100% asset ranges attract more scrutiny?
Will trustees need to show more clearly how they considered concentration, liquidity and their members' circumstances?
None of this is law yet but it points the same direction.
The concentrated property test
The clearest way to see whether a strategy is real is to apply it to a fund holding a large proportion of its assets in a single property. Common, and not automatically a problem.
But could the trustees answer:
Why is this level of concentration appropriate for this fund?
How was diversification considered, and why was this outcome accepted?
Does the fund hold enough liquid assets to meet expenses, tax, and any pension payments?
How will future liabilities be met — including a member starting a pension, or a death benefit becoming payable?
Does this approach still suit the members as their circumstances change?
If the answers exist and are documented, the strategy is doing its job. If the document simply records that the fund holds property between 0% and 100% of assets, it isn't.
Liquidity is where concentrated funds most often come unstuck. A property-heavy SMSF with a member approaching pension phase has a mathematical problem — minimum pension payments must be made in cash, and you can't sell a quarter of a house.
For existing trustees: what to do now
Nothing in the announcement requires you to rewrite anything or change your investments. The existing requirement hasn't changed.
But it's a reasonable prompt to check three things:
Does the strategy reflect what the fund actually holds today? If the fund bought a property in 2023 and the strategy still describes a balanced portfolio, they've drifted apart.
Could you explain the approach without reading the document? If the reasoning only exists on paper, it probably never existed in the decision.
When was it last properly considered, rather than updated and signed? Review means review. Re-dating is not review.
For anyone setting up a new SMSF
The reforms put the emphasis squarely on what happens before the fund exists and the money moves — and for good reason.
More than $100 million went into the Shield and First Guardian schemes through SMSFs. ASIC has reported that in some cases consumers were advised to establish an SMSF specifically to facilitate an investment into those schemes. The investment was the pathway; the SMSF was built to accommodate it.
That's why the two decisions have to be separated:
Is an SMSF appropriate for me — the structure, the cost, the trustee responsibility — independently of any particular investment?
Separately, is this investment appropriate for my SMSF and its strategy?
If you can't reach yes on the first question on its own, the second one doesn't matter. And if you get to yes, the investment strategy should come before the investing — not afterwards, to justify it.
If you're at that first decision, work through our 5-question SMSF checklist before anyone sets anything up for you.
Frequently asked questions
Is an SMSF investment strategy legally required?
Yes. Trustees must formulate, regularly review and give effect to an investment strategy that considers risk and return, diversification, liquidity, the fund's ability to meet liabilities, and whether to hold insurance for members..
How often does an SMSF investment strategy need to be reviewed?
At least annually, and whenever circumstances change significantly — a large new investment, a member entering pension phase, a change in members, or a material shift in the fund's asset mix. Reviewing means considering whether it still fits, and documenting that consideration.
Can an SMSF invest all its assets in one property?
There's no rule preventing it. Trustees must have considered diversification and be able to explain why the concentration is appropriate, and the fund must still be able to meet its liabilities as they fall due — which is where property-heavy funds most often run into difficulty.
Are 0–100% asset ranges acceptable in an investment strategy?
They're common, and they aren't automatically a breach. But ranges that broad show no evidence that trustees considered anything, and the Government's consultation on strategy quality suggests they'll attract more scrutiny.
Does the August 2026 reform mean I need a new investment strategy?
No. The proposed upfront requirement is to apply to new SMSFs, and none of the measures are law yet. Existing trustees can treat the announcement as a prompt to check whether the current strategy still reflects the fund. SMSFs are already required to have an investment strategy.
Who prepares an SMSF investment strategy?
The trustees are responsible for it. An accountant or adviser can help document it, but the reasoning has to be the trustees' own — that's the part that can't be outsourced, and the part the reforms are concerned with.
This article is general information only. It doesn't take into account your objectives, financial situation or needs, and isn't financial product advice. Get advice from a licensed professional who knows your circumstances before acting.
Leonie Martin is a CPA with 20 years' experience and the founder of HelloLedger, an online Australian accounting firm working with established business owners and SMSF trustees.
