SMSFs – The Lifestyles of the Rich & the Famous

Just under 70 new SMSFs are opened every day. In the last twelve months 25,296 new SMSFs were born. Out of Australia’s total superannuation pool of $2,050,000,000,000, there is now a massive $594,500,000,000 sitting in Self-Managed Super Funds, so why are so many people making the switch?

The latest superannuation statistics

Every three months the ATO (boo hiss) and APRA (who?) bombard us with the latest superannuation statistics. The number of SMSFs continues to climb at a rapid rate:

  • There are now over 550,706 SMSFs in Australia.
  • The total membership now stands at over 1,044,004 members

Out of Australia’s total superannuation pool, which stands at an estimated $2,050,000,000,000 (Yep – those are trillions) SMSF’s have the biggest share at 29% of the pie. $594,500,000,000 is an awful lot of pie.

In terms of growth there were 25,296 new funds opened during the last twelve months. That is approx. 70 Funds being opened every single day of the year.

With strong growth SMSFs shouldn’t be ignored…

What’s attracting so many Australians to SMSF?

Why are so many people ‘taking the plunge’ and setting up their own Self Managed Super Fund? According to Michael Saunders, Technical and Compliance Manager for Nexus Private “The reasons we hear most often include – control, consolidation, choice, the ability to borrow and cost savings”.

Control

Many Australians have been underwhelmed at the performance of their super funds over the past few years. The GFC has left a lot of investors concerned about how their own quality of retirement might be affected by movements in world markets. Everyone has heard those stories of poor retirees who have had to go back to work just to maintain a decent standard of living.

Consolidation

SMSFs allow couples to combine their super balances. We even see some people taking advantage of the ability for an SMSF to have up to 4 members. This can open the door to larger asset purchases that just wouldn’t have been possible for a single member. Many people combine their balances to purchase commercial or residential investment property.

Choice

The ability to choose exactly what to invest in is really one of the most distinguishing features of SMSFs. Most super funds allow you to invest in cash and managed funds. Some funds even allow you to invest in direct shares. With SMSFs your investment menu is unlimited. So for people who want to buy ‘bricks and mortar’ assets as part of their superannuation, SMSFs are the only option.

Ability to Borrow

SMSFs allow investors to consolidate their super funds and then borrow to purchase larger assets. This is how many Australians are now buying investment property inside super. With SMSF loans available up to 80%, investors have the opportunity to purchase investment property even if their combined balances are still relatively low.

Cost Savings

Like any trust structure the annual costs of administration, tax returns and audit are going to cost at least $2,000 each year. Some online firms may offer these services more cheaply but online usually means offshore – so security of information can be an issue in countries where the privacy laws are less strict. With the annual running costs being a factor, investors have to weigh up the overall benefits.

What Kinds Of Super Balances Are We Talking?

For many who are considering making a start there are more than 36,000 SMSFs with assets totalling less than $50,000 and over 2,000 SMSFs with a balance of over $10,000,000 (I am guessing those guys aren’t the ones worrying too much about the running costs.)

The bottom line – with greater control comes greater responsibility

SMSFs continue to grow at a rapid rate. Of course, they are not for everyone and is essential for investors considering SMSFs to get good advice and to be aware that SMSFs are a ‘step up’ in terms of taking responsibility for your retirement destiny.

If you need advice just come and knock on our door, for those of you with over $10,000,000 don’t bother knocking – just walk right in.

What our clients say…

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