Rising SMSF establishment balances ‘strong evidence’ advice improving

Rising SMSF establishment balances ‘strong evidence’ advice improving

24 July 2019

SMSF Association Media Release

There has been a sharp increase in the average and median establishment balances for self-managed super funds (SMSFs) – clear evidence that the quality of advice to the SMSF sector is improving and the key takeaway from the SMSF Association’s Review of the Australian Tax Office’s SMSF Statistical Overview 2016-17.

The statistics show that the average SMSF establishment size rose to $521,000 compared with the relatively stable levels of $370,000 in the previous four years – a 38% increase.

For median asset establishment size, the increase was also significant, rising substantially to $320,000 from the low $200,000 levels in the previous four years.

SMSF Association CEO John Maroney says: “From our perspective, this demonstrates that SMSF trustees are receiving quality SMSF advice.

“SMSF trustees and their advisers understand that they need an appropriately sized SMSF to ensure they receive the full benefits of an SMSF.

“The key to ensuring that SMSFs are established appropriately is high quality and professional financial advice that incorporates size and scale considerations into the decision to establish an SMSF.

“The provision of quality advice can ensure that members are only placed into SMSFs when that is in the client’s best interests and appropriate for their circumstances.”

Maroney says these ATO figures strengthen the Association’s resolve to ensure that all advisers providing SMSF advice should have specific education and qualifications.

“Not only will the benefits be seen with more appropriate establishment balances, but quality advice provided to SMSFs will materially improve member outcomes, positively affect retirement savings and protect individuals from inappropriate advice.”

Maroney says it’s worth noting that the average establishment number is above the Productivity Commission’s preferred minimum of $500,000, with the median balance likely achieve this target in the next few years based on the current trend.

Other highlights from the 2016-17 Overview are:

  • SMSFs made an average return of 10.2% compared with the 9.1% return for APRA-regulated funds.
  • SMSF expenses fell eight basis points, largely attributable to increased use of technology and software in fund administration.
  • Of SMSFs established in the 10 years prior to 30 June 2017, 88% were still in existence at that date.
  • The average age brackets of members who are establishing SMSFs is clearly skewed to younger demographics.

The 2016-17 financial year was also the last financial year before the extensive 1 July 2017 superannuation changes, which included the $1.6 million transfer balance cap, took effect.

Maroney says: “Accordingly, the statistics provide an interesting analysis of behavioural changes and SMSF trustee decisions before the impending legislation took effect. SMSF trustees clearly acted to contribute more to superannuation before more restrictive measures were placed on the system.”

To view the full report, please click here.