Legislative risk is the risk that when your strategy hinges on investing in a tax efficient manner, entitlement to social security, government subsidy or some other form of favouritism that somewhere down the track a government is going to screw it up for you.

This is particularly the case for superannuation, negative gearing, "tax efficient" rural programs and technology programs that work with government research grants.

It is hard to predict where future hazards lie, and the ATO has been ruthless recently in cracking down on various schemes that rely on tax deductions for profitability. Financial planners recommend overcoming this risk by diversifying into various investments, not all of which rely on government aid, and investing some money outside of superannuation as well as inside it.

Although I am sure this will immediately bring accusations of being a shameless shill for my industry, one of the better ways of getting around this risk is to see a financial planner and get annual reviews done. Any problems that are brewing may well be known to the financial planner. I know that at my firm we get circulars every week from the various legal experts and investment gurus in my dealer group keeping us up to date on all the latest legislation. You can do it yourself of course, though there are some things that full time professionals can do better.