An Option is a contract which gives the buyer the right, but not the obligation, to buy or sell an underlying asset or instrument at a specified strike price on or before a specified date. The buyer pays a premium to the seller for this right. The seller has the corresponding obligation to fulfill the transaction if the buyer exercises the option.

Options are a legitimate and allowable investment in an SMSF. However, there are a few things that Trustees need to have in place before they invest in options. These include checking the Trust Deed, and having in place a Derivatives Risk Statement and an Investment Strategy which describe the use of options.

An Option is a CGT asset as defined in subsection 108-5(1) of the ITAA 1997.  The ATO IDs note that options transactions should be treated on a capital account. The treatment of option income and expenses is explained in the following two ATO IDs:

ATO ID 2009/110 ATO ID 2009/111

To find out what other type of investments you can make within your SMSF, visit our Investments page.

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Superannuation Warehouse is an accounting firm and do not provide financial advice. All information provided has been prepared without taking into account any of the Trustees’ objectives, financial situation or needs. Because of that, Trustees are advised to consider their own circumstances before engaging our services.