Small SMSFs develop rapidly

 

The latest industry research has shown SMSFs with low balances grow to levels allowing them to become cost-efficient very quickly.

 

         

A significant number of SMSFs considered uncompetitive on a cost basis typically with balances below $200,000 have historically grown to exceed this efficiency threshold in a very short period of time, new industry research has shown.

A Rice Warner study commissioned by the SMSF Association and supported by SuperConcepts found this to be the case when analysing 6000 funds with holding assets of between $100,000 and $200,000 in value at the beginning of 2017.

Rice Warner found by the end of 2017 its sample size had grown to 8000 funds, however, over the 12 months around 2000 had already grown beyond an asset balance of $200,000.

At the conclusion of 2018, the analysis showed around 3000 funds had exceeded the $200,000 cost-competitive threshold, with around 400 in the cohort closed down.

Further, at the end of 2019, just over 3000 funds had balances greater than $200,000 and 1500 funds in the group had been wound up.

“What you see with this over the three years is there’s only a minority of the funds that stay in the range. The biggest single group are the ones that move above the range and there’s a smaller proportion, but still a material proportion, that are actually closed,” Rice Warner senior consultant Alun Stevens observed during an online presentation of the research today.

“If you look at the smaller ones [with balances of] $50,000 to $100,000, the number that close actually rises.

“So what we can see across these ranges quite clearly was the smaller funds were either there because they were in the early phase of their life and they grew quite rapidly … or they are funds that are at the end of their practical life and you see a lot of them get closed.”

As such, there are many SMSFs with small balances remaining in existence for a long time, Stevens noted.

The study into the sector showed SMSFs with asset balances of $200,000 or more are cost-competitive with public offer funds and can be the cheapest retirement saving vehicle when the fund asset pool is in excess of $500,000.

 

 

Darin Tyson-Chan
November 23, 2020
smsmagazine.com.au

 

More Articles

Why crypto treads an uncertain path through tax minefield

The taxation of digital assets used for lending and borrowing would benefit from clear-sighted...

Read full article

Wheat Production by Country

Check out the countries that produce the most...

Read full article

Labor tweaks stage 3 tax cuts to make room for ‘middle Australia’

Following years of mixed messaging, Labor has bowed to economic pressure and announced changes to its stage...

Read full article

Investment and economic outlook, January 2024

Region-by-region economic outlook and latest forecasts for investment returns. . What might shipping...

Read full article

Quarterly reporting regime means communication now paramount: expert

Communication between SMSF trustees, accountants and advisers is more crucial than ever with the quarterly...

Read full article

Four timeless principles for investing success

Investing success can mean different things to different people. Being clear on what success means for you is...

Read full article

Plan now to take advantage of 5-year carry forward rule: expert

This is the last year that the five-year catch-up contribution rules for concessional contributions can be...

Read full article

Super literacy low for cash-strapped

Financial literacy around superannuation is poor for many lower-income people, who still question why they...

Read full article

Sofie Korac is an Authorised Representative (No. 400164) of Prudentia Financial Planning Pty Ltd, AFSL 544118 and a member of the Association of Financial Advisers.

Financial Advice Sydney and the North Shore Office based in Gordon NSW

Financial Services Guide - Disclaimer & Privacy Policy

^