- SMSFs are still the leader of the pack
- Who runs the SMSF show, really?
- How old, and how wealthy, are SMSF trustees?
- How much money is invested via the average SMSF?
- What do DIY super fund trustees invest in?
- How well do SMSFs perform?
- How much do SMSFs cost?
- SMSFs – Average total operating expense ratio
- How much do SMSF members contribute?
- How much do SMSF members receive in benefit payments?
Note: The ATO publishes an annual report about SMSFs for each financial year. This article covers the ATO’s 2015-2016 statistical review of SMSFs (released in January 2018). This report also contains data for the 2016-2017 year. The annual report for the 2016-2017 year will be available in January 2019.
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 January 2018, the ATO released its eighth 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.
This article is a snapshot of the ATO’s latest statistical summary. Continue reading for the inside story on SMSFs including:
- 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
Background: The eight ATO SMSF report, and the latest report, was released in January 2018 and covers the 2015/2016 year, although the report also includes significant data about the 2016/2017 year. 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 (released in December 2013) covered the 2011/2012 financial year, the fifth report (released in December 2014) covering the 2012/2013 year, the sixth report was released in December 2015 covering the 2013/2014 financial year, and the seventh report was released in December 2016 covering the 2014/2015 year.
SMSFs are still the leader of the pack
SMSFs are the second fastest growing sector of the Australian super industry for the 5 years to 30 June 2017, with industry funds the fastest growing sector. During this 5-year period, SMSF assets grew by 65% (or $274 billion), while total super assets (including large funds) grew by 68% (or $942 billion). SMSFs contributed 29.1% in the proportion of overall growth, while industry funds contributed 30.1% ($288 billion), and retail super funds contributed 22.1% (or $208 billion).
The number of SMSFs also grew substantially (26%) during the 5 years to 30 June 2017, growing from 473,000 as at 30 June 2012 to 597,000 as at 30 June 2017. Historically, the number of SMSFs rose from just under 400,000 SMSFs at June 2009, to 414,000 at June 2010, to 440,000 at June 2011, to over 534,000 SMSFs at June 2014, and then to 557,000 as at 30 June 2015, and 577,236 as at 30 June 2016.
Note: More than half (53%) of all SMSFs have existed for more than 10 years, and 16% have existed for less than 3 years. The median fund has existed for 9 years. Further, 90% of all SMSFs established in the past 10 years to June 2016 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? Due to an issue with previously used data, the ATO has radically revised the proportion of SMSFs that use a corporate trustee, and these figures have been adjusted for previous years too. According to the ATO report, as at 30 June 2017, more than half (57%) of all SMSFs had a corporate trustee, rather than individual trustees. A year earlier, as at 30 June 2016, a similar percentage (55%) of SMSFs had corporate trustees. The 30 June 2016 figure is a revised percentage, because the ATO had previously reported that three-quarters (77%) of SMSFs had individual trustees rather than a corporate trustee, as at 30 June 2016. For newly registered SMSFs during the 2017 year, 81% opted for corporate trustees, with a similar percentage reported for the 2016 year (although previously the ATO had reported that more than 90% 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 2016. Of the 47% in pension phase, a quarter were in partial pension phase (that is, 11% of all SMSFs), while three-quarters were in full pension phase (that is, 36% of all SMSFs). 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 2015 year, 10% of SMSFs paying pensions to members for the first time were in the first year of operation, and likewise, for the 2016 year, 11% of SMSFs paying pensions for the first time were in the first year of operation, while 54% had been in operation for 5 years or less (with 24% in operation for less than 2 years). Of the SMSFs that had been established in the past 10 years to 30 June 2016, 70% had not started making pension payments.
Approved SMSF auditors. Approximately 5,800 approved SMSF auditors were involved in the SMSF sector as at 30 June 2016, conducting 74 audits each, on average As T 30 June 2015, there were 6,100 approved SMSF auditors, conducting 74 audits each, on average. For the 2016 year, more than half (53%) of all SMSF auditors performed between 5 and 50 SMSF audits, and 27% of SMSF auditors performed between 51 and 250 audits.
Tax agents and accountants. Around 13,400 tax agents and accountants looked after SMSFs as at 30 June 2016, with 99% of 2016 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% (around 2000 tax agents) had a single SMSF client. What this means is the higher average is skewed by the 7% of tax agents (902) 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 (58.28) years, and the median age is 59 (58.9) years. An interesting trend however is that members of newly registered SMSFs (for 2016 year) have a younger average age of 48 (47.5) years, and a median age of 47 (47.2) years.
The ATO report also states that a third (33%) of SMSF members are aged 65 and over, while in the non-SMSF sector only 7% of account holders are over 65.
At 30 June 2017, 83% of SMSF members were aged 45 years or older, which then means, obviously, that 17% of SMSF members are under the age of 45. Although for newly established SMSFs (for 2016 year), three-quarters of SMSF members (75.3%) are under the age of 55 (compared with 71% of newly established SMSF members in 2015, 68% of newly established SMSF members in 2014, and 65% of new 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 as at 30 June 2016, and 23% of SMSFs have one member.
For the year ended 30 June 2016, 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 2016 was $109,000, compared to non-SMSF members who had an average taxable income of $59,000. SMSF members aged 35 to 44 had an average taxable income of $123,875 compared to non-SMSF members in the same age group who had an average taxable income of $70,665.
How much money is invested via the average SMSF?
At 30 June 2016, the average assets of a SMSF exceeded $1.1 million, although the median asset size for SMSFs as at 30 June 2016 was $642,000. According to the ATO, the difference between the average and median amounts is explained by the fact that 33% of SMSFs hold assets worth more than $1.1 million (which increases the average).
The average assets of an SMSF was $1,126,863 for the 2016 year, while the average starting balance for a new SMSF (reported by funds established during the 2016 financial year) is $390,000.
The average SMSF member balance was $599,265 as at 30 June 2016. The average SMSF member balance for a new fund established during the 2016 year was $203,530.
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 latest profile of a ‘typical’ SMSF trustee?
What do DIY super fund trustees invest in?
As at 30 June 2016, just under 60% (54%) of all SMSF assets were invested in 2 asset classes – Australian listed shares (30.0%) and cash and term deposits (25%). According to the ATO, the move away from cash and term deposit continues with a drop of 7 percentage points during the 2016 year, which follows the drop of 2 percentage points during the 2015 year, which continues the trend of a 2 percentage point drop that occurred in 2014 year, and in the 2013 year.
Note: For the 2016 year, 7.0% of SMSFs reported assets held under limited recourse borrowing arrangements (LRBAs), an increase of 4 percentage points from the 2013 year (and only a slight increase from the 2015 year (6%), and for the 2014 year – 5.7% of SMSFs reported holding assets under LRBAs). The LRBAs were predominantly used to invest in Australian residential property and overseas shares, and 93% of all LRBA investments were in real property. Assets held under LRBA, represented 3% ($19.5 billion) of total SMSF assets for the year.
For the year ended 30 June 2016, just under half (47%) of SMSFs were in pension phase only (and from these SMSFs, 11% of all SMSFs, or just under a quarter of SMSFs in pension phase, were in both pension and accumulation phase). Significantly, 69% of all SMSF assets are held by members in pension 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: What assets do DIY super trustees prefer?
How well do SMSFs perform?
Over the 10-year period to 30 June 2016, on a year-by-year basis, large funds outperformed SMSFs delivering 5.01% a year on average, compared with 4.87% for SMSFs. The so-so long-term performance for both sectors is due to the Global Financial Crisis destroying the returns for 2 of those years within the timeframe. Note that these long-term average returns have been calculated by SuperGuide, rather than the ATO, but using the ATO’s annual performance data
Note: When comparing compound annual returns however, the winner is not so clear cut. Over the 10-year period, SMSFs delivered a compound annual return of 5.16%, while large funds delivered a compound annual return of 5.18%. Note that these compound annual returns have been calculated by SuperGuide, rather than ATO, but using the ATO’s performance data.
According to the ATO, the larger the SMSF, the better the investment return. For more information, including year-by-year return comparison, see SuperGuide article Large funds outperform SMSFs over 10 years, just.
How much do SMSFs cost?
Just over half (57.0% for 2016) of SMSFs had an estimated total operating expense ratio of 1.5% or less, with just under half of SMSFs (43.3%) having a total operating expense ratio of less than 1%, and more than a quarter of SMSFs (24.7%) having an expense ratio of less than 0.5% (that is a half of 1%).
Note: The total operating expense ratio (TER) for the 2016 year was 1.21% or $13,700 (latest TER information available as at January 2018). According to the ATO, SMSFs in pension phase had estimated average TER of $14,100 compared with SMSFs in accumulation phase with an average TER of $13,400.
The average total operating expense ratio (TER, which is calculated by dividing the costs of running a SMSF by the value of the fund assets) had declined over time up to 2012, with an average annual TER of 0.66% over the 4 years to 2012 according to the ATO. For the 2013 year however the average TER increased to 1.03%, due to new data collection on non-deductible expenses, from the 2012/2013 year onwards. For the 2014 year, the average TER rose to 1.06%, based on ATO figures. For the 2015 year, the average TER rose to 1.1%.
Update: In December 2016, the ATO revised the TERs for earlier years as follows: for 2011 year now 0.63% (up from 0.56%), for 2012 year now 0.67% (up from 0.56%), for 2013 year now 1.06% (up from 1.03%), and for 2014 year now 1.10% (up from 1.06%). The revised TERs have been included in the table below.
The table below outlines the average costs for an average SMSF balance. Note that the annual cost of a SMSF is dependent on the value of the fund assets because many SMSF costs are fixed costs, such as fund audit, preparation of accounts and the ATO supervisory levy. Also, the average fund balance (see table below) is reasonably high which means the fixed costs are spread over a larger value of assets. For more information on SMSF costs, see SuperGuide article SMSFs: How much does a DIY super fund cost?
SMSFs – Average total operating expense ratio
|Financial year||Average fund balance ($)*||Average operating expense ($)||Average total operating expense ratio (%)|
Source: Extracted from ATO reports, SMSFs: A statistical overview 2015-16’, SMSFs: A statistical overview 2014-15’, SMSFs: A statistical overview 2013-14’, ‘SMSFs: A statistical overview 2012-13’, ‘SMSFs: A statistical overview 2011-12’, ‘SMSFs: A statistical overview 2010-11’, SMSFs: A statistical overview 2009-10’ and ‘SMSFs: A statistical overview 2008-09’.
*The average fund balance has been calculated by SuperGuide using the average total operating expense figures and expense ratios, and the balances are rounded to the nearest $1000, or $100.
SMSF audit fees: The average SMSF audit fee was $694 for the year ended 30 June 2016, compared with $754 for the year ended 30 June 2015, compared with $724 for the year ended 30 June 2014, and compared with $737 for the year ended 30 June 2013, and compared with $571 for the 2012 year, $596 for the 2011 year, and $623 for the 2010 year. For the 2016 financial year, 37% of SMSFs paid less than $500 to approved auditors for audit fees, and 50% of SMSFs paid $500 to $999 for audit fees, while 2.2% paid more than $2,000 or more (compared with 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 Are SMSF audits too expensive?
How much do SMSF members contribute?
According to the ATO, over the 5-year period to 30 June 2015, super contributions to SMSFs averaged $28.1 billion a year, with $21.4 billion of those contributions made by fund members, and $6.6 billion made by employers. Super contributions were paid into the super accounts of 61% of SMSF members.
As at 30 June 2016, the $25.1 billion of SMSF super contributions represented 24% of all super fund contributions. SMSF member contributions represented 53% of all member super contributions across all super funds during the 2016 year, while SMSF employer contributions represented only 8% of all employer contributions across all super funds during the 2016 year.
Total contributions made to SMSFs over the 5 years to 30 June 2016 increased by 21%, which was 6 percentage points higher than the 16% growth in total contributions experienced by all super funds.
How much do SMSF members receive in benefit payments?
During the 2016 year, the average benefit payment per fund was $127,000 and the median payment was $63,000. Both average and median payments increased by 26% and 21% respectively over the 5-year period to 30 June 2016.
In 2016, 94% of benefit payments were paid as pension payments (compared with 82% in 2012, and 79% in 2010), while the remaining 6% were paid as lump sums. According to the ATO, the jump in pension payments post-2012 was due a rise of 11% in 2013, as a result of improved data collection.
Transition-to-retirement pensions (TRIPs) represent 11% of all pension payments (little change from the 10% of payments in 2010, and 11% of payments in 2011), and SMSF members receiving TRIPs represent 18% of those receiving pension payments (compared with 17% in 2010, and 18% in 2011).
The largest benefit payments were received by those 75 years and over (average of $96,000). The profile of SMSF member receiving pension payments over the period from 20121 to 2016 became older: 36% of SMSF members receiving benefit payments were aged 70 years or over (compared with 33% in 2015, 26% in 2012, and 23% in 2010), while 54% of SMSF members receiving benefit payments were aged 60 to 69 (compared with 56% in 2015, 61% in 2012, and 62% in 2010).
For more information on the SMSF statistics discussed above, you can access the ATO reports by clicking on the links below:
- Self-managed super funds: A statistical overview 2015-16
- Self-managed super funds: A statistical overview 2014-15
- Self-managed super funds: A statistical overview 2013-14
- Self-managed super funds: A statistical overview 2012-13 (no longer available online)
- Self-managed super funds: A statistical overview 2011-12 (no longer available online)
- Self-managed super funds: A statistical overview 2010-11 (no longer available online)
- Self-managed super funds: A statistical overview 2009-10 (no longer available online)
- Self-managed super funds: A statistical overview 2008-09 (no longer available online)