ATO, Financial Planning

Advice key to rising SMSF establishment balances

SMSF establishment balances rise

The rise in SMSF establishment balances reflects a vast improvement in quality of financial advice within the sector, the SMSF Association has claimed.

The quality of financial advice within the SMSF sector has improved significantly and has led to an increase in average and median fund establishment balances, according to the SMSF Association’s review of the latest ATO statistics.

The ATO’s “SMSF Statistical Overview 2016/17” revealed the average SMSF establishment size had risen by 38 per cent to $521,000, compared to $370,000 in the previous four years, and the median asset establishment had increased to $320,000 from $200,000 in the previous four years.

SMSF Association chief executive John Maroney said: “From our perspective, this demonstrates that SMSF trustees are receiving quality SMSF advice.

“SMSF trustees and their advisers understand that they need an appropriately sized SMSF to ensure they receive the full benefits of an SMSF.

“The key to ensuring that SMSFs are established appropriately is high-quality and professional financial advice that incorporates size and scale considerations into the decision to establish an SMSF.”

Maroney said the ATO numbers reflected the importance of SMSF-specific education and qualifications to all advisers providing advice to the sector.

“Not only will the benefits be seen with more appropriate establishment balances, but quality advice provided to SMSFs will materially improve member outcomes, positively affect retirement savings and protect individuals from inappropriate advice,” he added.

He pointed out the average establishment number was above the Productivity Commission’s preferred minimum of $500,000 and said the median balance was likely to exceed this target in the next few years.

In addition to the rise in establishment balances, the ATO reported a higher average return of 10.2 per cent for SMSFs in 2016/17 compared with a 9.1 per cent return for Australian Prudential Regulation Authority-regulated funds, and a substantial decrease in SMSF expenses, which the association attributed to a wider use of technology and software in fund administration.

Maroney also noted the 2017 financial year on which the ATO report was based was the last financial year before superannuation changes, including the $1.6 million transfer balance cap, took effect on 1 July 2017.

“Accordingly, the statistics provide an interesting analysis of behavioural changes and SMSF trustee decisions before the impending legislation took effect. SMSF trustees clearly acted to contribute more to superannuation before more restrictive measures were placed on the system,” he said.

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