Small SMSFs develop rapidly
The latest industry research has shown SMSFs with low balances grow to levels allowing them to become cost-efficient very quickly.
A significant number of SMSFs considered uncompetitive on a cost basis typically with balances below $200,000 have historically grown to exceed this efficiency threshold in a very short period of time, new industry research has shown.
A Rice Warner study commissioned by the SMSF Association and supported by SuperConcepts found this to be the case when analysing 6000 funds with holding assets of between $100,000 and $200,000 in value at the beginning of 2017.
Rice Warner found by the end of 2017 its sample size had grown to 8000 funds, however, over the 12 months around 2000 had already grown beyond an asset balance of $200,000.
At the conclusion of 2018, the analysis showed around 3000 funds had exceeded the $200,000 cost-competitive threshold, with around 400 in the cohort closed down.
Further, at the end of 2019, just over 3000 funds had balances greater than $200,000 and 1500 funds in the group had been wound up.
“What you see with this over the three years is there’s only a minority of the funds that stay in the range. The biggest single group are the ones that move above the range and there’s a smaller proportion, but still a material proportion, that are actually closed,” Rice Warner senior consultant Alun Stevens observed during an online presentation of the research today.
“If you look at the smaller ones [with balances of] $50,000 to $100,000, the number that close actually rises.
“So what we can see across these ranges quite clearly was the smaller funds were either there because they were in the early phase of their life and they grew quite rapidly … or they are funds that are at the end of their practical life and you see a lot of them get closed.”
As such, there are many SMSFs with small balances remaining in existence for a long time, Stevens noted.
The study into the sector showed SMSFs with asset balances of $200,000 or more are cost-competitive with public offer funds and can be the cheapest retirement saving vehicle when the fund asset pool is in excess of $500,000.
Darin Tyson-Chan
November 23, 2020
smsmagazine.com.au
Latest Newsletters
Hot Issues
- Our investment and economic outlook, July 2024
- Striking a balance in the new financial year
- The five reasons why the $A is likely to rise further - if recession is avoided
- What super fund members should know when comparing returns
- Insurance inside super has tax advantages
- It’s never too early to start talking about aged care with clients
- Capacity doubts now more common
- Most Gold Medals in Summer Olympic Games (1896-2024)
- SMSF assets reach record levels amid share market rally
- Many Australians have a fear of running out
- How to get into the retirement comfort zone
- NALE bill passed by parliament
- Compliance focus impacts wind-ups
- LRBA interest rates increase for 2025
- Income-free areas set to increase from 1 July
- Most Spoken Languages in the World
- Middle-to-higher incomes boosting SMSF growth
- Investment and economic outlook, May 2024
- Transitioning into retirement: What you should know
- Plan now to take advantage of stage 3 tax cuts
- Deeming freeze a win for Age Pensioners
- Downsizer contributions can be time critical
- The superannuation changes from 1 July
- The Deadliest pandemics in History
- Winners & Losers
- Budget breakdown – Federal Government Analysis
- Federal Budget 2024
- Getting to a higher level of financial literacy in Australia
- What is the future of advice and how far off is superannuation 2.0?
- Investment and economic outlook, April 2024
- Australia’s debt service ratio ‘extraordinary’: CBA
- Connecting an adviser with your children
Article archive
- April - June 2024
- January - March 2024
- October - December 2023
- July - September 2023
- April - June 2023
- January - March 2023
- October - December 2022
- July - September 2022
- April - June 2022
- January - March 2022
- October - December 2021
- July - September 2021
- April - June 2021
- January - March 2021
- October - December 2020
- July - September 2020
- April - June 2020
- January - March 2020
- October - December 2019
- July - September 2019
- April - June 2019
- January - March 2019
- October - December 2018
- July - September 2018
- April - June 2018
- January - March 2018
- October - December 2017
- July - September 2017
- April - June 2017
- January - March 2017
- October - December 2016
- July - September 2016
- April - June 2016
- January - March 2016
- October - December 2015
- July - September 2015
- April - June 2015
October - December 2020 archive
- 2020 is coming to an end. Phew!!
- ATO flags key deadlines for early release of super
- Retirement costs rising despite COVID impacts
- Government targets fund expenditure, best interests in new super reforms
- Small SMSFs develop rapidly
- Investing basics for first timers
- Behind the dash in new market listings
- Super, death, and taxes
- What millennials are thinking about investing and retirement
- Capital preservation front of mind for SMSF returns
- Comprehensive list of COVID-19 initiatives and packages.
- Most SMSFs are still poorly diversified
- Related party purchases must be clean
- How your coming tax cut could pay off
- Majority of retirees expected to fall short on retirement savings
- Monitoring super performance critical in light of new measures
- Budget 2020 - A very comprehensive break down.
- Budget 2020 - Fact Sheets
- Budget 2020 - At a Glance, Overview, Outlook
- JobKeeper extension – changes implemented
- Temporary home office expenses shortcut extended again
- Investment preferences of the young
- How to construct an effective portfolio
- Estate planning opportunities highlighted with work test changes
- Lenders are getting tougher on older borrowers