The SMSF Professionals’ Association of Australia (SPAA) remains positive about the development and growth of the sector despite the latest Australian Taxation Office (ATO) statistics reflecting a slight softening in the speed of fund establishments.
The regulator’s data showed in the year ending March 2014 the number of SMSF establishments dropped by 8495 or 20.38 per cent, going from 41,689 during the 12 months to March 2013 to 33,194.
A comparison over the same period showed net SMSF set-ups, establishments less wind-ups, fell from 33,799 for the 12 months to March 2013 to 27,034 for the year ending March 2014. This represented an actual decrease of 6765 or 20 per cent.
“SPAA is encouraged by this trend. It suggests that people are only opting for an SMSF after doing their due diligence and deciding whether an SMSF is the appropriate retirement savings vehicle for them,” SPAA chief executive Andrea Slattery said.
While a drop off in fund establishments was evident, the latest figures showed the number of SMSF members passed the 1 million mark, now standing at 1,006,975, representing a net gain of 11,384 from December 2013 when there were 995,591 members.
Slattery heralded that development as significant for the sector.
“The number of trustees and members exceeding 1 million is an important milestone for the SMSF industry, clearly demonstrating that there is a growing number of people wanting to take direct responsibility for their retirement savings,” she said.
“It now compels everyone involved in the industry to ensure that these trustees and members have access to the best professional advice, and certainly SPAA is committed to this outcome.”
The ATO statistics also showed a 17.2 per cent increase in residential property investments over the 12 months to March 2014, jumping from $17.5 billion to $20.5 billion.
In examining that rise, SPAA pointed out the proportion of residential properties in SMSF portfolios had to be taken into account.
“Residential property still only represents 3.7 per cent of total SMSF assets of $558.5 billion, and is still dwarfed by non-residential property assets at $68.4 billion or 12.2 per cent of total assets,” Slattery said.
“In addition, most of that growth occurred in the first nine months to 31 December 2013, and was starting to ease in the last quarter.”
Although allocations to residential property were rising, the statistics suggested it did not appear to be sourced from limited recourse borrowing arrangements.
“It’s also interesting to note that limited recourse borrowing arrangements only increased 1.6 per cent in the March quarter and now stand at $2761 million or 0.5 per cent of all SMSF assets. Again SPAA would suggest this number illustrates that trustees and members are adopting a conservative approach to gearing,” Slattery said.
