Do you fit the latest profile of a ‘typical’ SMSF trustee?

Note: As at 30 June 2017, the ATO estimates there were 596,516 SMSFs, and assuming the average membership of an SMSF is 1.9 members (based on ATO data), then you can expect roughly 1,133,000 SMSF trustees are running those funds. As at 31 March 2017, the ATO reports there were 1,120,117 SMSF trustees running 590,742 SMSFs.

Average is not always typical

According to the ATO, the total amount of wealth owned via SMSFs is just under $700 billion ($696.7 billion) as at June 2017 – just under a third (29.6%) of all money invested in superannuation entities. When looking at all money invested in the 214 large super funds (industry, retail, corporate, public sector funds) plus 596,516 SMSFs, combined, then SMSF assets represent 33% (32.6%) of all money invested in the 5 types of super funds! (For more information on the other super market players, see SuperGuide articles SMSFs surge towards 600,000 controlling $700bn in assets and Comparing super funds: Who’s who in the super zoo?.)

As at March 2017, the average SMSF balance was approximately $1,142,000, which means that the average fund balance for a SMSF has increased by roughly 9% over the past 6 months (around $1,051,000 as at September 2016). Note that it is an average fund balance, which possibly means new SMSFs with smaller balances may skew the average increase, Markets have also been volatile in recent months, although presumedly this reasonable growth in fund balances can also be linked to last-minute contributions made by SMSF members taking advantage of the higher contributions caps that changed on 1 July 2017. Noting also that more SMSF members entering retirement phase and withdrawing larger pension payments than previously, and low interest rates on cash savings.

The average account balance for a SMSF member is roughly $602,385 as at 31 March 2017 ($556,500 as at September 2016, $553,000 as at March 2016, $560,000 as at June 2015, and $543,128, as at March 2014). 

Note: A typical SMSF has 2 fund members, although an ‘average’ SMSF supports 1.9 fund members (that is, dividing the number of SMSF trustees by the number of SMSFs).

The average fund balance (or average account balance per member) however doesn’t necessarily represent a typical SMSF. Here’s a few interesting statistics (as at 31 March 2017):

• One-fifth (19.1%) of all SMSFs have $200,000 or less in assets, with 6.1% of SMSFs (about 36,000 SMSFs) holding less than $50,000 in assets.
• Another quarter (23.7%) of all SMSFs have between $200,000 and $500,000 in fund assets
• Just under a quarter (24.2%) of SMSFs hold between $500,000 and $1 million in assets.
• Just under one-fifth (18.8%) of SMSFs have at least $1 million in assets and up to $2 million in assets.
• The remaining 14.2% have more than $2 million in fund assets with 0.5% of SMSFs holding more than $10 million. Note that 2.8% of all SMSFs (around 16,500 SMSFs) have fund balances worth $5 million or more.

The size of a SMSF can also be influenced by the number of fund members – presumably, the more members a SMSF has, the more likely the fund balance will be larger. For the record, more than two-thirds (69.8%) of SMSFs have two members, nearly a quarter (22.7%) are single-member SMSFs and 7.6% of SMSFs have three or four members.

Another significant trend is that the number of Australians setting up SMSFs is not stalling as predicted by many in the super industry only a few years ago – more than 28,000 SMSFs were established during the 12 months to June 2017 (and more than 33,000 for 12 months to June 2016, and 34,402 for the 12 months to June 2015, and 33,823 for the 12 months to June 2014).

SMSF wind-ups: In the 12 months to June 2016 the number of SMSFs would up totalled 4835, compared with 11,526 SMSF wind ups in the 12 months to June 2015, and 11,970 SMSF wind ups in the 12 months to June 2014, For the 3 months to March 2017, the number of wind-ups totalled a paltry 96 SMSFs, although in the 12 months to March 2017, there were 7,220 SMSF wind ups. At the time of writing, the June 2017 wind-up figures were not available.

Historically, the higher wind-up figures for SMSFs in June of each year are due to individuals realising that running an SMSF is more work than they expected, and so they opt to wind up the fund, although some are linked to the death of the last member of an SMSF. I find the much lower wind-up figures for the 2016 financial year heartening because I interpret this trend as an indication that Australians are doing their research and making an educated choice when deciding whether to set up a SMSF, and whether such a hands-on super fund is appropriate.

SMSF trustees are getting younger…

Nearly two-thirds (59.9%) of SMSF trustees are aged over 55, but the latest statistics reinforce that the dominance by over-55s is slowly changing as younger generations discover the joys (and tribulations) of running their own funds. One quarter (24.1%) of new SMSF trustees (for funds established during the March 2017 quarter) are over the age of 55, which obviously means three-quarters (75.9%) of new SMSF trustees are under the age of 55, and a significant 43.2% are under the age of 45.

Looking at both new and existing SMSF trustees, a massive 82.7% of SMSF trustees are at least 45 years old, with a third (31.9%) of SMSF trustees aged 65 or over. When you look at the profile of new SMSF trustees (established during March 2017 quarter) however, only 56.8% of the new trustees are over 45, and nearly a third (30.5%) of the new trustees are aged between 35 and 44 years, with another third (32.7%) of new trustees aged between 45 and 54 years.

Where SMSF trustees live…

Typically, if you’re over 55 and live in New South Wales or Victoria, then you’re more likely than any other Australians to run a SMSF, according to ATO statistics. Nearly two-thirds of all SMSFs (63.1%) are based in Victoria and New South Wales, and nearly two-thirds (60.0%) of all SMSF members are aged 55 or over. If you’re under the age of 25 and live in Tasmania or Northern Territory, then you’re the least likely to run a SMSF with a mere 0.7% of SMSF members falling into the under-25 category and only 1.3% (around 7,700, as at March 2017) of SMSFs being based in Tasmania, and 0.2% (1,200, as at March 2017) in Northern Territory, according to the ATO.

Queenslanders, however, control a healthy 16.6% (around 98,000, as at March 2017) of all SMSFs, and Western Australians run 9.9% (around 58,500, as at March 2017) of the 590,742 SMSFs in Australia as at March 2017. South Australia isn’t far behind, with 7.1% of all SMSFs (around 42,000) being based in South Australia.

Earn less than $80,000…

Two-thirds (64.4%) of SMSF trustees have a taxable income of less than $80,000 a year although this statistic is likely to be distorted by the fact that SMSF trustees receiving payments from SMSF pensions are not required to include this pension income in personal tax returns.

More than half (53.3%) of SMSF trustees earn less than $60,000 a year, while just under half (40.5%) of all SMSF trustees have a taxable income of $40,000 or less. Nearly a quarter (21.8%) of all SMSF trustees earn less than $20,000, while a similar percentage (23.8%) of SMSF trustees earn $100,000 or more.

Note: The ATO does not have taxable income figures for 3.9% of SMSF members.

And for those curious about the gender balance within SMSFs, females are outnumbered by males, but only just —52.6 per cent of SMSF trustees are men, and 47.4 per cent are women, generally reflecting that many couples start a SMSF together. The gender breakdown for new SMSFs established 3 months to March 2017 is nearly the same (53.5% men, 46.5% women) as the overall gender balance.