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ATO, Superannuation

Clearer cost data welcomed

SMSF expense data

The ATO SMSF overview for the 2017/18 financial year has been commended by a peak industry body for providing more accurate expense data about the sector.

The SMSF Association has applauded the release of the ATO statistical overview for 2017/18 as the industry body believes it has provided more indicative data about annual expense of running an SMSF.

The endorsement of the latest statistics refers specifically to the finding that the median annual operating expense level for an SMSF in 2017/18 was $3923 as opposed to the average yearly SMSF expense level of $13,900 published in a recent Australian Securities and Investments Commission (ASIC) fact sheet, a figure the SMSF Association had previously criticised.

“We welcome this latest data from the ATO on operating expenses as it reflects a far more realistic assessment of what it costs to operate an SMSF,” SMSF Association chief executive John Maroney said.

Maroney attributed the increased accuracy of the data to the regulator’s concerted efforts to reflect SMSF costs in a more detailed manner, a move he said the industry body has been actively encouraging.

“Previous analysis relied on the use of averages that ignored the significant distortions caused by large SMSFs and funds choosing to use borrowings and buy extensive administrative, insurance and investment services,” he said.

“High total average expense figures have not reflected the reality of the typical SMSF and we acknowledge the ATO’s willingness to listen to our concerns and to present the data in a more transparent and meaningful way.”

He said the flaw in using averages and aggregated expense data was illustrated by the ASIC SMSF Fact Sheet, causing the figures published to lack balance and ignore the impact of optional expense components.

“In the latest ATO overview, new tables break down median and average expenses by type and fund size, as well as streamlining ‘operating expenses’ to include the following components: auditor fees, management and administration expenses, other amounts and the SMSF supervisory levy,” he noted.

“What these revised tables clearly show is how SMSFs exceeding $2 million had a significant impact on the weighting of the costs allocated to an average figure. In addition, the impact of expenses such as investment expenses, insurance and interest on investment borrowings were attributed to the average when many SMSFs choose not to use these services.”

He pointed out the nature of the new ATO statistics allows users to estimate a median yearly operating expense of $3400 for SMSFs established with a balance between $200,000 and $500,000 as a cost assessment could now include basic operating expenses only.

The SMSF Association’s commentary on the enhanced accuracy of the ATO figures comes after federal member of parliament Tim Wilson was reported to be similarly critical of the ASIC SMSF Fact Sheet, labelling the annual average cost figure of $13,900  as “sheer fantasy” because it included investment and interest expenses.

Wilson formed a similar conclusion to Maroney’s that the ATO’s disaggregated and more detailed data allowed the “true” running costs of an SMSF to be reflected.

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