Note: This article contains the latest statistics available as at April 2016 (for statistics up to December 2015). We update this article with the latest statistics every 6 months or so.
Australia’s DIY super fund sector has emerged as the most financially powerful sector in the superannuation industry.
As at 31 December 2015, self-managed super funds (SMSFs), as DIY super funds are officially known, controlled $595 billion of the $2 trillion held in super assets in Australia.
Remarkably, this massive amount of super money ($595 billion) is controlled by 4.5% of Australia’s population (Australia’s SMSF trustees). Today, Australia’s 1 million or so DIY super trustees manage assets that are worth more than all the money held in the millions of industry super fund accounts, and worth more than all the money held in the millions of retail super fund accounts.
Since 1996, the number of DIY super funds has more than quintupled — from around 100,000 DIY funds in 1996, to 440,000 SMSFs by the end of 2010, and now close to 600,000 (566,735) as at 31 December 2015.
The SMSF market has grown steadily with the growth in the number of new SMSFs spiking immediately after the super tax changes (delivering tax-free super for over-60s) were announced in May 2006. An unprecedented 43,000-odd new SMSFs were established during the 2007 financial year (more than double the number established in the 2006 year).
Since 2007, the number of new SMSFs each year has been consistently around, or above, the 33,000-plus mark, although new SMSFs spiked in the 2012 year (41,000), and in the 2013 year (39,600). According to the ATO, the annual average of new SMSFs over the 5-year period from 2011 financial year to 2015 financial year, was almost 36,000 a year, or approximately 3,000 new SMSFs each month. Note that over this same timeframe, SMSF wind-ups averaged about 7,400 a year.
Expect penalties for bad behaviour
Having such substantial financial power means that SMSF trustees also have to take very seriously their responsibility to follow the super rules. The message is clear: SMSF trustees can now expect greater attention from the regulator and from Government. For more information on what powers the ATO has to monitor, enforce behaviour and financially penalise, see SuperGuide articles SMSF compliance: Administrative penalties hit hard for misbehaving trustees and SMSF trustees face big penalties: 2018/2019 guide
Beginner SMSF trustees beware
In the past, the ATO has warned that one of the ATO’s concerns is that new or recent registrants may not be aware of, or understand their obligations.
The ATO has previously predicted that because of the tax benefits associated with superannuation, the SMSF structure will become the primary vehicle for intergenerational tax planning. The senior decision-makers at the ATO anticipate that changes will occur in SMSF investment strategies reflecting this long-term outlook.
The ATO is concerned that the massive growth in SMSFs will make DIY super trustees targets for ill-suited investment products. The ATO has warned that SMSF trustees of SMSFs must accept responsibility for their investment choices and the associated risk, and consider such things as diversification and cash flow.
Note that SMSF trustees are subject to administrative penalties for late returns. If you lodge your SMSF return outside the specified lodgement dates then your fund will be hit with a late return penalty.
The tax office checks that SMSF returns are complete and accurate. If you’re unwise enough to make a false or misleading statement in your fund’s annual return or in any other approved form required by the tax office, then expect to be hit with a penalty. The tax office can impose a penalty on an SMSF trustee if the trustee makes a statement to a tax official, or omits facts from the statement and the statement is misleading in a “material particular” because of the omission.
A valuable SMSF resource
Not surprisingly, considering the spectacular growth in SMSFs, I have received thousands of questions from SMSF trustees hungry for clear, accurate and independent information about running a DIY super fund.
My book, DIY Super for Dummies is in its 3rd edition, and is a culmination of the super rules, but presented in a way that reflects the most popular and most important questions asked by SMSF readers of SuperGuide.com.au
Apart from the ATO website, my book, and the SuperGuide website, www.superguide.com.au are the main sources of independent information on DIY super in Australia.
I trust you will find these resources useful.