SMSFs may be benchmarked too

SMSFs performance

SMSFs could have a mandatory annual performance assessment applied to them as an extension of measures introduced for MySuper funds in the federal budget.

The introduction of performance measures for MySuper funds announced in the 2020 federal budget has initiated speculation the practice may end up applying to SMSFs as well.

Speaking during a post-budget webinar, Heffron managing director Meg Heffron said: “You do wonder whether one day the reporting SMSFs have to give to the ATO will be expanded out to include some kind of performance metric.

“So I do wonder whether we start with APRA (Australian Prudential Regulation Authority) [regulated] funds, but eventually the ATO requires SMSFs do some kind of performance reporting.”

According to Heffron, it would be debatable as to the effect a requirement like this would have on SMSFs, seeing the penalties applying to APRA-regulated funds found to be underperforming against their peers could not be applied to the sector.

Under the proposed initiative, APRA-regulated funds classified to have underperformed for two consecutive years have to inform their members about the assessment and will be closed to new members, and would be unable accept new members until a further test demonstrating underperformance no longer exists is satisfied.

“Obviously it doesn’t really matter if you get a fail on your SMSF because you can choose to stay there anyway, but it will be interesting I think to see how that plays out,” Heffron said.

During the same webinar, Heffron head of SMSF technical and education services Lyn Formica acknowledged the new practice would be useful for SMSFs regardless of whether it was eventually applied to them.

“It could be a useful tool for self-managed funds if they’re looking for some sort of benchmarking to compare themselves to what other funds are doing with some data available that they can compare themselves to,” Formica said.

“I’ve certainly had a number of trustees come to me [asking if] there is some list [I can share with them] on what performance other self-managed superannuation funds have because they want to be able to test themselves.”

Separate analysis on budget night indicated the new annual testing of MySuper fund performance could make SMSFs more popular with people looking to maximise their retirement savings returns.

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