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Stats show SMSF enjoy economies of scale

The latest ATO statistics regarding the SMSF sector provide clear evidence self-managed funds are enjoying the benefits of scale.

The annual report released by the regulator, “Self-Managed Superannuation Funds: A Statistical Overview 2013-14”, revealed a direct correlation between the costs associated with running an SMSF and the asset balance of the fund.

In effect, the data indicated the running expenses of an SMSF fell in direct proportion to the asset size of the fund.

To illustrate the finding, the study highlighted in 2014 the average operating expense ratio of an SMSF with an asset balance of $50,000 or less was 12.1 per cent, whereas an SMSF with assets of $500,000 or more had an operating expense ratio of 1.4 per cent or less.

The statistical paper also showed SMSFs in pension phase in 2014 had slightly higher estimated operating expenses of $12,100 compared with funds in accumulation phase, which incurred estimated operating expenses of $10,300.

When analysing the figures a little more closely, trust deed provider Super Central said: “The reason for the difference is that SMSFs in pension phase incur expenses not incurred by SMSFs solely in accumulation phase, such as actuarial certificates and possibly greater advice fees, given the greater need to monitor cash flow while in pension phase.”

Overall, the numbers showed the estimated average operating expense ratio was 1.06 per cent in 2014, which marked an increase in comparison to the ratio of 0.65 per cent recorded in the three years to 2012.

However, Super Central pointed out the increase could not be taken at face value due to the treatment of some expenses.

“From 2013 onwards, the SMSF annual return was modified to collect non-deductible expenses, particularly expenses incurred during pension phase,” the trust deed specialist said.

“Secondly, expenses include interest expenses, which may more properly be considered an investment expense than an administrative expense, as such interest is incurred by reason of limited recourse borrowing arrangements.”

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