ATO, Superannuation

Wind-ups peak but growth continues

SMSF wind-ups

New ATO data shows the level of SMSF wind-ups peaked in 2017/18, but the size of the SMSF sector continues to grow steadily.

The level of SMSF wind-ups reached a record high during the 2018 financial year, while new establishments dropped away, according to the latest annual overview of SMSF data released by the ATO.

As part of its annual reporting on the SMSF sector, the ATO found 22,730 funds were wound up during 2017/18, well above the annual average of 15,000 fund wind-ups for the five years to 2017/18, while 25,429 new funds were established during that year.

This latter figure was slightly down compared to previous years in which an average of 30,620 funds were established for the five years to 2017/18, and was reflected in the net establishments totalling only 2700 for the year.

In its analysis of the figures, the SMSF Association noted the sizeable decline for the 2018 financial year, but pointed out that more recent establishment figures are trending upwards at a strong rate, and taken over a longer period the SMSF sector has continued to grow.

“Early indicators suggest that the number of SMSF registrations has been increasing. The number of SMSF registrations received between July and December 2019 was 11,558. This compares to 10,954 SMSF registrations received for the same period last year, representing an increase of 5.5 per cent,” the association said.

“SMSF registrations for January and February 2020 were 3246 compared to 2807 SMSFs registered during the same period last year. That is an increase of 15.6 per cent.”

It noted that in the five years to 2018/19, the number of funds grew by an annual average of 2.9 per cent, or by 28,490 new funds each year, and the more recent growth “is expected to continue due to the economic impacts of COVID-19 as some members choose to establish SMSFs to enable greater control of their retirement savings”.

According to the 2017/18 ATO data, the total number of SMSFs was 581,853 and that climbed to 599,678 funds during the 2019 financial year, as did the total number of SMSF members, which climbed from 1.091 million to 1.125 million across the same period.

Average SMSF assets on establishment had also increased over the five years to 2017/18 to $409,000, but were down from 2016/17 when the figure peaked at $497,000.

The association noted the overall average increase in assets on establishment was the “most significant takeaway in last year’s ATO statistics” and indicative that the majority of funds were receiving quality financial advice.

It attributed some of the increase to the behavioural changes resulting in individuals establishing SMSFs with larger amounts due to the expected lower contribution caps taking effect on 1 July 2017.

“Promisingly, the 2017/18 statistics do not show a significant fall in fund establishment size and continue to demonstrate that the majority of SMSFs are being set up with a balance in excess of $200,000,” it said.

“Some SMSFs have been established with lower balances while expecting future contributions and roll-ins to be received within a short time frame.”

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