ATO figures throw fresh light on SMSF operating expenses

22 June 2020

SMSF Association Media Release

The ATO’s 2017-18 Statistical Overview of SMSFs shows the median “operating expense” of SMSFs is $3,923 a year, a more appropriate indication of their basic operating cost compared with the $13,900 total average expense figure highlighted in a recent SMSF Fact Sheet.

SMSF Association CEO John Maroney says: “We welcome this latest data from the ATO on operating expenses as it reflects a far more realistic assessment of what it costs to operate an SMSF.

“We have been encouraging the ATO to publish more granular expense data and are extremely supportive of the updated data that has now been released.

“Previous analysis relied on the use of averages that ignored the significant distortions caused by large SMSFs and funds choosing to use borrowings and buy extensive administrative, insurance and investment services.

“High total average expense figures have not reflected the reality of the typical SMSF, and we acknowledge the ATO’s willingness to listen to our concerns and to present the data in a more transparent and meaningful way.”

The Association has prepared a short report that draws on the latest statistical information from the ATO, titled “ATO Self-Managed Superannuation Funds: A Statistical Overview 2017-2018”.

Maroney says: “As many in the industry are aware, aggregated expense data made it difficult to clearly determine the basic operating expenses of an SMSF. This was recently highlighted in an ASIC SMSF Fact Sheet that we believe was well intended to help people consider whether an SMSF was a suitable choice for them but lacked balance and would have benefited from more context about optional expense components.

“In the latest ATO Overview, new tables break down median and average expenses by type and fund size, as well as streamlining ‘Operating expenses’ to include the following components: auditor fees, management and administration expenses, other amounts and the SMSF supervisory levy.

“What these revised tables clearly show is how SMSFs exceeding $2 million had a significant impact on the weighting of the costs allocated to an average figure. In addition, the impact of expenses such as investment expenses, insurance and interest on investment borrowings were attributed to the average when many SMSFs choose not to use these services.

“The data allows us to take a fund with a typical establishment balance of between $200,000 to $500,000 and, if we only include the basic operating expenses, we can estimate the median operating expense to be around $3,400 for these SMSFs.”

Maroney adds that the Overview paints a healthy picture of the SMSF sector, with an average investment return of 7.5% compared with the 8.5% return for the APRA funds, maintaining the strong run of positive returns by SMSFs and the continuing comparable performance with APRA-regulated super funds.

The statistics also provide the first interesting analysis of the behavioural changes of SMSF trustees after the 1 July 2017 measures took effect, particularly in relation to contribution levels and benefit payments.

The SMSF Association Report can be found here.