According to the latest ATO statistics, Self-Managed Superannuation Funds (SMSF) continue to remain popular, with around 456,000 SMSFs registered at 30 June 2011 holding $418 billion in assets.
The statistics also highlight some interesting data which is relevant for those operating a SMSF, and those thinking of establishing one.
Member vs Employer Contributions
Interestingly, of the total $34.2 billion in contributions made to SMSF, $25 billion of these were contributions from members, with the remaining $9.2 billion being contributions by employers.
This shows that SMSFs are being used more for personal, after-tax contributions than they are for tax-deductible contributions.
This may be unsurprising since the halving of the concessional contribution limits from $50,000 to $25,000.
Choice of trustee
At 30 June 2011, over 74% of SMSFs had individual trustees rather than corporate trustees.
There has also been a shift away from corporate trustees, with 90% of new SMSFs registered in the 2011 financial year favouring individual trustees.
Whether this is a factor of the additional costs of a corporate trustee is not known, but the numbers definitely show that individual trustees are the favoured option.
Member and fund demographics
Members
- 92% of all funds having two or less members
- 81% of all members are aged 45 or over, with males slightly outweighing females across these age groups
- The average taxable income of all members was $90,754, with those aged 35-49 having the highest average taxable income at $114,094.
- Across all age groups, the average taxable income of SMSF members is 78% higher than others who are members of funds that are not SMSF.
- The average balance is greatest for those over the age of 50, with those over 65 having the highest average balance of $772,610.
This shows that, generally speaking, SMSFs have members that are higher income earners and are most likely to be over the age of 45, with a close split between male and female. As members age, their balances grow as would be expected with more contributions and the reinvestment of income earned by the fund.
Funds
- Over 63% of funds have been established for 5 years or more, with 42.8% of funds in existence for 10 years or longer.
- The average asset value of SMSFs was $888,000, and the median asset figure of almost $512,000. This difference reflects the fact that 26.7% of funds have over $1 million in assets.
- Listed shares (32.2%) and cash/term deposits (27.9%) make up the largest proportion of asset allocation, with non-residential real property third at 11%.
- Operating expenses as a ratio of fund size: As high as 7% for funds under $50k in assets, reducing to less than 1% for funds with more than $500,000 in assets.
While there has been significant growth in the number of SMSFs, the largest number have been around for more than 5 years.
Shares, cash and business property still remain the largest investment by SMSF, and this becomes more affordable with the average value of assets in SMSF getting close to $1 million.
Compliance
One important aspect of running a SMSF is the compliance required, including yearly audits.
Recently the ATO released statistics showing that excess contribution tax assessments for those members breaching their concessional contribution limits had increased threefold (from 15,315 to 45,330) between 2009 and 2010, with the assessments for the 2010 year yet to be completed.
This shows that even with a large amount of publishing of the changes, there still continues to be breaches of the regulations.
In addition, Auditor Contravention Reports have risen, with a rise of 8% in the number of funds in breach, and 20% rise in the number of contraventions.
Conclusions
The use of a SMSF seems to favour those over the age of 35 with taxable incomes in excess of $100,000 per year.
While there are quite clearly benefits in the use of SMSF, care also has to be taken to ensure:
- the fund remains compliant;
- it generates sufficient returns to cover costs
- it generates sufficient returns to provide for retirement
The other aspect of the average balances and age groups is that investing in superannuation is a long term investment, and it takes time to build up balances.
This shows that planning early is vitally important to ensure you have enough income in retirement.