SMSFs outperform APRA-regulated funds in fresh analysis
SMSFs on average generated a high return compared with APRA-regulated funds in the 2016–17 financial year, according to analysis by the SMSF Association.
In an analysis report of the ATO’s SMSF statistics for 2016–17, the SMSF Association said SMSFs generated an average return of 10.2 per cent in the 2016–17 financial year compared to the 9.1 per cent return for Australian Prudential Regulatory Authority–regulated funds.
The SMSF Association said this was a significant result, given the differences in ATO and APRA investment return methodologies, which has typically seen SMSF investment returns understated compared to those for APRA funds.
“This is predominantly due to the differing data sets available to the ATO and APRA which limit the comparability of the investment returns reported by each. Aligning the methodologies may require the ATO to impose additional reporting burdens on SMSF trustees,” the report stated.
“Furthermore, another significant issue in comparing investment returns, especially at a sector level, is that SMSFs have a significant proportion of members in retirement phase compared to APRA-regulated funds which can distort comparisons.”
The different costs that are included in the return on assets for SMSFs compared to the rate of return for APRA-regulated funds also make it difficult to compare investment returns across the sector, and come to a conclusion on what level of assets are required by SMSFs to achieve similar returns to APRA-regulated funds.
“Therefore, the positive performance of SMSF funds in the 2016–17 is a testament to the ability of the SMSF sector to deliver positive investment outcomes for SMSF members,” it said.
“However, it must be remembered that analysis must look further than a discussion of comparable returns and look towards individual retirement goals and income needs.”
The report also stated that the ATO SMSF statistics point to a high level of satisfaction among SMSF members.
“Of SMSFs established in the 10 years prior to 30 June 2017, 88 per cent were still in existence at that date. This is a significant indication of the satisfaction that SMSF members experience with their SMSF,” it stated.
“It highlights that there is only small subset of people that are entering the SMSF sector and shortly exiting due to it being inappropriate for their circumstances.”
Miranda Brownlee
Miranda Brownlee is the deputy editor of SMSF Adviser, which is the leading source of news, strategy and educational content for professionals working in the SMSF sector.
Since joining the team in 2014, Miranda has been responsible for breaking some of the biggest superannuation stories in Australia, and has reported extensively on technical strategy and legislative updates.
Miranda also has broad business and financial services reporting experience, having written for titles including Investor Daily, ifa and Accountants Daily.
