SMSF confidential: the inside story on DIY super funds

Note: The ATO publishes an annual report about SMSFs for each financial year. This article covers the ATO’s 2013-2014 statistical review of SMSFs (released in December 2015). This report also contains data for the 2014-2015 year. The annual report for the 2014-2015 year will be available in late December 2016.

The Australian Taxation Office has delivered on its promise to regularly share its market intelligence about self-managed super funds (SMSFs). The ATO has now provided the answers to some of superannuation’s burning questions, such as, ‘Are SMSFs really cheaper than larger super funds?’ and ‘Do SMSFs perform better?’

In December 2015, the ATO released its sixth report into self-managed super funds, publishing key data about SMSF costs, investment performance, SMSF asset allocation, SMSF demographics, types of trustees, and what SMSFs are doing in pension phase.

The latest report gives us an insight, albeit a slightly static and historical insight, into the wealth and behaviour of SMSF trustees. For some SMSF trustees, the ATO findings will simply confirm what you already know about SMSFs based on your own SMSF experience. For many SMSF trustees and service providers however, the ATO report highlights trends in how SMSF trustees invest, how much SMSFs cost to run, and how much money is flowing into SMSFs.

Background: This trend towards ATO transparency began in 2009, when the ATO produced a SMSF statistical summary for the Cooper Review. The 2009 report contained information from both publicly available and previously unpublished ATO data. Two years later, the ATO updated this earlier statistical summary by producing the report, ‘Self-managed super funds: A statistical overview 2008-2009’. And again, in April 2012, the ATO released a SMSF report, ‘Self-managed superannuation funds: A statistical overview 2009-10’. The third report was released in late December 2012 covering the 2010/2011 year, the fourth report was released in December 2013 covering the 2011/2012 financial year, and the fifth report was released in December 2014, covering the 2012/2013 year. The sixth report, and the latest report, was released in December 2015 covering the 2013/2014 financial year. The report also includes significant data about the 2014/2015 year.

This article is a snapshot of the ATO’s latest statistical summary. Continue reading for the inside story on SMSFs including:

  • ATO analysis of the SMSF data
  • SMSF growth: average account balance and total assets
  • Individual versus corporate trustees
  • SMSF service providers
  • Age and income of SMSF trustees
  • Asset size of SMSFs
  • SMSF investment performance and asset allocation
  • SMSF costs
  • Super contributions made to SMSFs
  • SMSF benefit payments

What does the ATO think of the report?

The ATO provides some preliminary observations in the executive summary of the report, which is set out below:

Self-managed superannuation funds (SMSFs) make up 99.5% of the number of funds and 29% of the $2 trillion total superannuation assets as at 30 June 2015. There were 5557,000 SMSFs holding $590 billion in assets, with more than 1 million SMSF members.

The continuing strength and community confidence in the SMSF sector is demonstrated by positive shifts in SMSF numbers, total assets and member account balances over the 5 years to 2014. Changes in the composition of SMSF asset portfolios show the ability of SMSFs to adjust to changing circumstances and economic conditions.

Over the five years to 30 June 2014, the average assets pf SMSFs grew by 23% and reached more than $1 million for the first time in 2014. Likewise, average assets per member increased to $564,000, the highest over the period.

Member contributions made to SMSFs increased by 41% over the five years to 2014. However, employer contributions made to SMSFs fell by 9%. By comparison, both member and employer contributions to all super funds increased by 30% and 22% respectively.

SMSF members tended to be older than members of APRA funds and had both higher average balances and higher average taxable incomes. However, the trend continued for members of new SMSFs to be from younger age groups when compared to those across the total SMSF member population. The median age of SMSF members of newly established funds in 2015 decreased to under 50 years.

The majority of SMSFs continued to be solely in the accumulation phase (53%). However, over the five years to 2014, there was a shift of funds moving into the full pension phase (8%). This is consistent with the increase in benefit payments over the period, to more than $30 billion for the first time in 2014.

Of SMSFs starting to make pension payments in 2014, 48% were more than five years old, while 28% were less than two years old. Of funds established over the last 10 years to 2014, 69% have not started making pension payments.

SMSFs directly invested 83% of their assets, mainly in cash and term deposits and Australian-listed shares (a total of 60%). In 2013–14, funds across most asset value ranges tended to also favour cash and term deposits, while those with more than $1 million in assets held a higher proportion in listed shares. SMSFs in the pension phase held a more diversified investment portfolio.

Of SMSFs with assets held under limited recourse borrowing arrangements, the majority of funds used those arrangements to acquire assets in residential real property and overseas shares, representing 2.4% and 1.6% of the total SMSF population respectively. In terms of value, real property assets collectively made up 85% or $12.8 billion of investments held under limited recourse borrowing arrangements.

At 30 June 2014, SMSFs held $13 billion in borrowings representing 2.3% of the total value of assets held by SMSFs. The proportion of SMSFs with borrowings increased progressively from 2.3% of funds in 2010 to 6.7% in 2014. Likewise the average amount borrowed increased from $305,000 in 2010 to $373,000 and $3.8 billion in other liabilities – 1.9% and 0.8% of total assets respectively. SMSFs with borrowings were more likely to hold non-residential and residential real property, assets held under limited recourse borrowing arrangements and other assets, compared to the total SMSF population.

In 2013–14, estimated return on assets for SMSFs was positive (9.8%). This is the fifth consecutive year the estimated SMSF return on assets has been positive. The trend in estimated returns is consistent with that for APRA funds of more than four members.

The estimated average operating expense ratio of SMSFs in 2013–14 increased to 1.06% and an average value of $11,200. SMSFs in pension phase had higher total average operating expenses than that of funds solely in accumulation phase. In contrast by operating expense type incurred, SMSFs in accumulation phase tended to have higher average interest expenses. This is in line with most SMSFs with borrowings being in the accumulation phase.

Source: Executive summary, Self managed superannuation funds – A statistical overview 2013-14

SMSFs are still the leader of the pack

SMSFs are the fastest growing sector of the Australian super industry for the 5 years to 30 June 2015, along with industry funds. During this 5-year period, SMSF assets grew by 44% (or $181 billion), while total super assets (including large funds) grew by 51% (or $686 billion). SMSFs contributed 26.4% in the proportion of overall growth, while industry funds contributed 26.6% ($182 billion), and retail super funds contributed 24.5% (or $168 billion).

The number of SMSFs also grew substantially (27%) during the 5 years to 30 June 2015, growing from 440,000 as at 30 June 2011 to 557,000 as at 30 June 2015. Historically, the number of SMSFs rose from just under 400,000 SMSFs at June 2009, to 414,000 at June 2010, to over 534,000 SMSFs at June 2014, and then to 557,000 as at 30 June 2015.

Note: Nearly half (44%) of all SMSFs have existed for more than 10 years, and 18% have existed for less than 3 years. Further, 90% of all SMSFs established in the past 10 years to June 2014 are still in existence.

For more information on the growth in number of SMSFs see the full ATO report (see link at end of article). 

Who runs the SMSF show, really?

Individual trustee, or corporate trustee? According to the ATO report, three-quarters (78%) of SMSFs had individual trustees rather than a corporate trustee, as at 30 June 2015. For newly registered SMSFs during the 2015 year, 95% opted for individual trustees. In recent years there has been a shift away from corporate trustees: for each of the financial years ended 30 June 2014, 30 June 2013 and 30 June 2012, more than 90% (92%) of newly registered SMSFs had individual trustees.

Accumulation phase, or pension phase? Just over a half (53%) of SMSFs reported they were solely in accumulation phase, while the remaining 47% reported they were making pension payments to some or all members (and so were considered in pension phase), for the year ended 30 June 2014. Of those in pension phase, 11% were in partial pension phase, while 36% were in full pension phase. In previous reports, the ATO had observed an interesting trend that there had been a continuing shift towards new SMSFs starting pensions in the first year inferring that an increasing number of Australians are setting up SMSFs with superannuation savings from large super funds, transferred on retirement. For the 2014 year, 10% of SMSFs paying pensions to members for the first time were in the first year of operation, while 25% had been in operation between 2 and 5 years. Of the SMSFs that had been established in the past 10 years to 30 June 2014, 69% had not started making pension payments.

Approved SMSF auditors.  Approximately 6,300 approved SMSF auditors were involved in the SMSF sector as at 30 June 2014, conducting 64 audits each, on average. More than half (55%) of all SMSF auditors performed between 5 and 50 SMSF audits, and 26% of SMSF auditors performed between 51 and 250 audits.

Tax agents and accountants. Around 13,300 tax agents and accountants looked after SMSFs as at 30 June 2014, with 99% of 2014 SMSF annual returns lodged by a tax agent. Tax agents and accountants had an average of 32 registered SMSF clients, although it is worth noting that half of the tax agents looked after 10 or fewer SMSFs, while 15% (2,054) had a single SMSF client. What this means is the higher average is skewed by the 7% of tax agents (909) that look after 100 or more SMSFs.

How old, and how wealthy, are SMSF trustees?

According to the ATO report, the average age of an SMSF member is 58 years, and the median age is 59 years. An interesting trend however is that members of newly registered SMSFs (for 2014 year) have a younger average age of 49 years, and a median age of 49 years.

The ATO report also states that just over a quarter (26%) of SMSF members are aged 65 and over, while in the non-SMSF sector only 5% of account holders are over 65.

At 30 June 2015, 85% of SMSF members were aged 45 years or older, which then means, obviously, that 15% of SMSF members are under the age of 45. Although for newly established SMSFs (for 2014 year), more than two-thirds of SMSF members (71%) are under the age of 55 (compared with 65% of newly established SMSF members in 2013, and 51% in 2010).

The gender balance of SMSF trustees is 53% male and 47% female, and 70% of SMSFs have two members, and 23% of SMSFs have one member.

For the year ended 30 June 2014, SMSF members of all ages had a higher average taxable income than non-SMSF members. The average taxable income of all SMSF members in the year ended 30 June 2014 was $109,000, compared to non-SMSF members who had an average taxable income of $58,000. SMSF members aged 35 to 49 had an average taxable income of $132,000 compared to non-SMSF members in the same age group who had an average taxable income of $69,000.

How much money is invested via the average SMSF?

At 30 June 2014, the average assets of SMSFs exceeded $1 million for the first time, although the median asset size for SMSFs as at 30 June 2014 was $603,000. According to the ATO, the difference between the average and median amounts is explained by the fact that 32% of SMSFs hold assets worth more than $1 million (which increases the average).

The average SMSF member balance was $564,000 as at 30 June 2014. The average SMSF member balance for a new fund established during the 2014 year was $187,325.

The average assets of an SMSF was $1,066,080 for the 2014 year, while the average starting balance for a new SMSF (reported by funds established during the 2014 financial year) is $361,429.

For more information on the age, income and wealth profile of SMSF members see the full ATO report (see link at end of article, or check out SuperGuide article Do you fit the profile of a ‘typical’ SMSF trustee?

What do DIY super fund trustees invest in?

As at 30 June 2014, just over 60% of all SMSF assets were invested in 2 asset classes – Australian listed shares (31.8%) and cash and term deposits (27.4%). According to the ATO, compared with 2013, there was a slight drop (2%) in the allocation to cash and term deposits and a slight increase (2%) into shares.

Note: For the 2014 year, 5.7% of SMSFs reported assets held under LRBAs, an increase of nearly 3% from the 2013 year. The LRBAs were predominantly used to invest in Australian residential property and overseas shares, although 85% of all LRBA investments were in real property.

For the year ended 30 June 2014, just under half (47%) of SMSFs were in pension phase, but these pension phase SMSFs held 70% of all SMSF assets. It is not clear if the 70% figure includes assets in accumulation phase that may be owned by the 11% of SMSFs that are in both pension and accumulation phase.

For more information on the types of SMSF investments and the typical asset allocation see the full ATO report (see report link at end of article), or check out SuperGuide article SMSF investment: Three most popular asset classes, and the rest

How well do SMSFs perform?

Over the 8-year period to 30 June 2014, SMSFs outperformed large funds delivering 4.99% a year on average, compared with 4.8% for large funds. The dismal long-term performance for both sectors is due to the Global Financial Crisis destroying the returns for 2 of those years within the timeframe.

Year by year however, large funds outperformed SMSFs in 4 years out of 8, while SMSFs outperformed large funds in 3 years out of 8, with both large funds and SMSFs delivering identical returns for the 2012 year. The table below lists the investment returns for each year for both large funds and for SMSFs.

Note: According to the ATO, the larger the SMSF, the better the investment return.

Investment performance
Financial yearSMSFs (%)Large funds (%)Outperformer
2008-5.9% (loss)-8.1% (loss)SMSFs
2009-6.7% (loss)-11.5% (loss)SMSFs
20107.7%9.3%Large funds
20117.7%8.1%Large funds
20120.4%0.4%SMSFs and large funds
201310.2%14.0%Large funds
20149.8%11.7%Large funds

Note: While the methodology used to estimate SMSF performance resembles APRA’s, the data collected is not the same. The data in the table above is sourced from four ATO reports: SMSFs — A statistical overview 2013-2014, SMSFs – A statistical overview 2012-2013, SMSFs – A statistical overview 2011-2012, SMSFs – A statistical overview 2010-2011, SMSFs-A statistical overview 2009-10, and SMSFs – A statistical overview 2008-09.

How much do SMSFs cost?

Almost two-thirds (60.3% for 2014) of SMSFs had an estimated operating expense ratio of 1.5% or less, with just under half of SMSFs (46%) having an operating expense ratio of less than 1%, and more than a quarter of SMSFs (26.2%) having an expense ratio of less than 0.5% (that is a half of 1%).

The average operating expense ratio had fallen steadily in percentage terms over the 4 financial years from 2008 to 2011, and remained steady for the financial year ended 30 June 2012. From the 2013 year however, the average operating expense ratio jumped, since the ATO now includes expenses that super accounts in pension phase cannot claim as tax deductions. In the past, these expenses were not included in the statistics.

According to the ATO, SMSFs in pension phase had estimated average operating expense ratios of $12,100 compared with SMSFs in accumulation phase with AOER of $12,100.

More specifically the average operating expense ratio for each financial year (sourced from previous ATO reports and the current ATO report) was as follows:

  • For year ended 30 June 2008 (0.69% or $6,500 in dollar terms)
  • For year ended 30 June 2009 (0.58% or $5,100 in dollar terms)
  • For year ended 30 June 2010 (0.57% or $5,000)
  • For year ended 30 June 2011 (0.56% or $5,300).
  • For year ended 30 June 2012 (0.56% or $5,600).
  • For year ended 30 June 2013 (1.03%, or $10,200).
  • For year ended 30 June 2014 (1.06%, or $10,700) 

Note: SMSFs with fund balances of less than $50,000 had a 12.05% average operating expense ratio compared to SMSFs with fund balances of more than $500,000 and less than $1 million, with an average expense ratio of 1.35%, and compared with SMSFs with $2 million-plus balances, with an AOER of 0.63%.

SMSF audit fees: The average SMSF audit fee was $714 for the year ended 30 June 2014, compared with $736 for the year ended 30 June 2013, and compared with $571 for the 2012 year, $595 for the 2011 year, and $623 for the 2010 year. For the 2014 financial year, 37% of SMSFs paid less than $500 to approved auditors for audit fees, while 3% paid more than $2,000 or more (compared to 4% of SMSFs for the 2008 year).

For more information on SMSF costs see the full ATO report (see report link at end of article), or check out SuperGuide articles SMSF: How much does a DIY super fund cost? and Super fees: how much should a fund charge you? and Are SMSF audits too expensive?

How much do SMSF members contribute?

According to the ATO, over the 5-year period to 30 June 2014, super contributions to SMSFs averaged $24.4 billion a year, with $17.8 billion of those contributions made by fund members, and $6.6 billion made by employers. Super contributions were paid into the super accounts of 63% of SMSF members.

As at 30 June 2014, SMSF super contributions represented 22% of all super fund contributions. SMSF member contributions represented 50% of all member super contributions across all super funds during the 2014 year, while SMSF employer contributions represented only 8% of all employer contributions across all super funds during the 2014 year.

Total contributions to SMSFs over the 5 years to 30 June 2014 increased by 25% which was in line with the 25% growth in total contributions experiences by all super funds.

How much do SMSF members receive in benefit payments?

During the 2014 year, the average benefit payment per fund was $120,000 and the median payment was $61,000. Both average and median payments increased by 29% over the 5 year-period to 30 June 2014.

In 2014, 82% of benefit payments were paid as pension payments (compared with 68% in 2010), while the remaining 18% were paid as lump sums.

Transition-to-retirement pensions (TRIPs) represent 13% of all pension payments (an increase from the 10% of payments in 2010), and SMSF members receiving TRIPs now represent 20% of those receiving pension payments (compared with 17% in 2010).

According to the ATO, the average benefit payment per member increased each year, to $72,000 in 2014, compared with $61,350 in 2010, and the largest payments were received by those 75 years and over (average of $88,000). The profile of SMSF member receiving pension payments over the 5-year period became older: 31% of SMSF members receiving benefit payments were aged 70 years or over (compared with 23% in 2010), and 58% of SMSF members receiving benefit payments were aged 60 to 69 (compared with 62% in 2010).

For more information on the SMSF statistics discussed above, you can access the ATO reports by clicking on the links below:


  1. This report mentions a decline in the proportion of funds with corporate trustees. Do you have an article describing the pros and cons of corporate vs individual trustees?

  2. Michael Fitzpatrick says:

    If the ATO’s figures are supposed to represent the full costs of running an SMSF then they understate these costs. Nowhere on the Annual Return do they question what the MER might be for any managed investments held.

  3. Many thanks Wendy for your kind comments. We’re delighted that you finds the information helpful. Regards Trish

  4. wendy donald says:

    Thank you so much for this summary. As usual the information and explanations you provide are a ray of light in a dim room. What this tells me is that my ‘gut’ feeling about SMSF costs and returns is spot on. I am glad the ATO is giving us information, and that you are putting it in a form easily grasped.

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