Self-managed superannuation funds (SMSFs) make up 99% of the number of funds and 30% of the $1.9 trillion total superannuation assets as at 30 June 2014. There were 534,000 SMSFs holding $557 billion in assets, with over 1 million SMSF members representing 9% of approximately 11.6 million members in Australian super funds.
The data confirms the SMSF sector continued to respond to changing economic circumstances, evident from positive shifts in SMSF numbers, total assets and member account balances over the five years to 2013. SMSFs also showed their flexibility and resilience in their ability to concentrate or diversify asset portfolios.
For the first time, in 2013 average taxable income of SMSF members reached over $100,000. Likewise, the average SMSF member account balance in 2013 reached $524,000 and was the highest over the period.
Over the five years to 2013, member contributions made to SMSFs increased by 5%. However, employer contributions fell by 46%, largely due to the decrease in 2013 to $5.5 billion. By comparison, both member and employer contributions to all super funds increased by 10%.
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 than those of the total SMSF member population. For the first time, the median age of SMSF members of newly established funds in 2013 decreased to less than 50 years.
The majority of SMSFs continued to be in the accumulation phase (63%). However, over the five years to 2013, there was a shift of SMSFs from being in the accumulation phase moving into the full pension phase (approximately 7%). Of SMSFs starting to make pension payments in 2013, 43% were more than five years old, while 38% were less than two years old. Of funds established over the last 10 years to 2013, 74% have not started making pension payments.
SMSFs directly invested 78% of their assets, mainly in cash and term deposits and Australian-listed shares (a total of 61%). In 2012–13, funds across most asset ranges tended to also favour cash and term deposits, while those with more than $2 million in assets held a higher proportion in listed shares. Of SMSFs with assets held under limited recourse borrowing arrangements, the majority acquired assets in residential real property (51%) and non-residential real property (28%). In terms of value, real property assets collectively made up 89% or $7.4 billion of investments in limited recourse borrowing arrangement.
At 30 June 2013, SMSFs held $9.2 billion in borrowings and $3.8 billion in other liabilities – 1.9% and 0.8% of total assets respectively. The proportion of SMSFs with borrowings increased progressively to 5% in 2013, and the average amount borrowed also increased to $366,000. 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 2012–13, estimated return on assets for SMSFs was positive (10.5%), the highest over the five-year period, and in positive terms for the fourth consecutive year. 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 2012–13 increased to 1% and an average value of $10,200. This increase is due to new data collection from 2012–13 on non-deductible expenses incurred by SMSFs, particularly those in pension phase. As a result, SMSFs in pension phase had higher total average operating expenses than SMSFs solely in accumulation phase. The average ratio of operating expenses continued to decline in direct proportion to the increase in fund asset size.