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.”
“impose additional reporting burdens on SMSF trustees” simply to try to compare the returns of SMSFs vs. APRA regulated funds? Surely that would just impose an additional cost that erodes SMSF member’s final balance without providing any tangible benefit to those members? Especially when this would still leave “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”.
While it would be “nice” to know how SMSFs are performing compared to APRA regulated funds, especially for those whose business it is to ‘spruik’ the benefits of SMSFs (in order to get more fees from SMSF activities), it is hardly in SMSF member’s “best interest” to add a cost that won’t provide them with any direct benefit.