ATO data shows impact of SMSF balance on performance
The newly released ATO’s Statistical overview for SMSFs in 2012/2013 indicates a direct correlation between the size of SMSF balances and the average return on assets (ROA) generated by funds, with larger funds generally outperforming.
The statistics, released yesterday, showed ROA on average was negative for SMSFs with balances less than $200,000 for four out of the five years leading to June 2013 and negative for SMSFs with less than $100,000 for all five years.
SMSFs with balances greater than $200,000 on the other hand only experienced negative ROA on average in 2009 and 2012.
The ATO said in its overview the statistics on return on assets show a “direct relationship with SMSF size”.
“Generally the larger the SMSF asset holding the more improved the return on assets,” said the ATO.
The statistics for 2013 demonstrated this with SMSFs greater than $2 million achieving an 11.98 per cent average ROA; while those with less than $50,000 generated a -16.78 per cent average ROA.
SMSF Professionals' Association of Australia senior manager of technical and policy Jordan George said the stronger return on assets among the larger funds could be the result of other factors such as the mix of assets in the SMSF rather than size.
“Those funds with higher balances are probably more diversified,” said Mr George.
“The ATO stats do tend to indicate that larger funds have diversification which in turn helps them obtain greater returns.”
Mr George said the statistics did show the average balance for SMSFs being established had increased eight per cent in the five years to 30 July 2014 up to $187,000.
The statistics, he said, also indicated the median balance has increased 20 per cent over the five years.
“The statistics should allay some people’s concerns that too many SMSFs are being set up with very small balances – the ATO shows this isn’t an issue,” he said.
The ATO statistics also showed operating expenses account for a much greater proportion of the smaller funds in comparison to larger funds.
“[The statistics] show the estimated operating expense ratio declines in direct proportion to the size of the fund,” said the ATO.
“In 2013, SMSFs with $50,000 or less in assets had an average operating expense ratio of 10.9 per cent compared to SMSFs with more than $500,000 in assets that had an average of less than 1.5 per cent.”