Latest stats back up research into SMSF longevity and returns: educator

There was a dramatic decrease in the number of SMSF wind-ups from 2018 to 2023, indicating that the SMSF sector is outperforming APRA funds in both returns and customer satisfaction, says a leading educator.

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Shelley Banton, head of education for ASF Audits, told SMSF Adviser the latest SMSF quarterly statistics from the ATO reveal a consistent trend in wind-ups since the 2021 fiscal year, notably, a 9 per cent decrease in 2022, followed by a further 33 per cent decline in the 2023 fiscal year.

“Delving into the quarterly data offers valuable insights,” she said.

 

“From 2018 to 2022, the average number of wind-ups each December stood at 1,575. However, December 2023 saw a stark contrast, with only 216 wind-ups recorded — a reduction exceeding 87 per cent.”

Ms Banton said the continuation of this trend hinges on several pivotal factors including the high investment returns the sector is seeing, which was highlighted in the University of Adelaide's research, commissioned by the SMSF Association.

That research found that investment returns for SMSFs in the 2021–22 financial year outperformed the APRA fund sector by 4.1 percentage points, demonstrating their resilience in market downturns.

In a financial year where the bellwether S&P/ASX 200 index fell more than 10 per cent, the median SMSF only retreated one per cent compared with the median APRA fund which fell 5.1 per cent.

Ms Banton said the investment returns for SMSFs, particularly during market downturns, underscore the enduring appeal and resilience of SMSFs.

She added that the rising number of SMSF establishments suggests sustained interest from new entrants and individuals undergoing family disruptions, such as divorce, may opt to remain within the SMSF sector rather than transitioning to an APRA fund.

Additionally, since 1 July 2021, SMSFs have been permitted to have up to six members and the annual figures for the 2022 fiscal year indicate that approximately 1,150 members are either the fifth or sixth members of an SMSF.

“As intergenerational SMSFs gain traction, the growth in the proportion of funds by the number of members could also contribute to the decline in wind-ups,” she said.

 

 

 

 

 

Keeli Cambourne
28 February 2024
smsfadviser.com

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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.

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