Mathias Cormann (WA, Liberal Party, Vice-President of the Executive Council) Share this | Hansard source

I thank Senator Bernardi for that question. As the regulator for self-managed super funds, the ATO has responsibility to ensure that trustees comply with their obligations and the super laws, one of which is to have an investment strategy that has given due consideration to a number of risks, including the risk of inadequate diversification. The action referred to in the article relates to recent ATO correspondence in writing to approximately three per cent of SMSF trustees and their auditors who had invested 90 per cent or more in a single asset or asset class and had used a limited-recourse borrowing arrangement to acquire that asset.

The ATO's intention was to raise awareness of investment strategy obligations. The ATO focused on this group following concerns raised in a report by the Council of Financial Regulators and the ATO to government in relation to leverage and risk in the superannuation system in February this year. This report highlighted concerns that less diversified self-managed super funds with limited-recourse borrowing arrangements are exposed to asset concentration risk which, in the event of a fall in the asset price, could lead to a significant loss in the value of the fund. But the ATO's records show that these SMSFs may hold 90 per cent or more of funds in one asset or a single asset class, and as regulator for SMSFs the ATO thought it appropriate to raise awareness of the investment strategy obligations. I can advise the Senate that the ATO did not demand that a detailed investment strategy be provided to the ATO. The letter simply requested that trustees review their investment strategy.