SMSF contributions down but transfers out have doubled
SMSF contribution amounts have fallen by more than two-thirds but transfers out have almost doubled since the introduction of the TBC in 2017, according to figures released by APRA.
Research from Rainmaker Information into the figures from the Australian Prudential Regulation Authority (APRA) figures show that although the level of contributions has increased year-on-year for the past five years, it’s still more than 65 per cent below what it was in 2017.
The data shows in 2021–22 SMSF members contributed $15 billion to their SMSF member accounts but in 2016–17, before the introduction of the transfer balance cap (TBC), they contributed $38 billion.
The first TBC in 2017 limited the amount of retirement savings that would be tax-free to $1.6 million and amounts above this threshold are now taxed at a nominal 15 per cent.
Rainmaker Information’s research revealed that while employer contributions to SMSFs have remained stable through the period, voluntary top-up member contributions have plummeted.
“The TBC profoundly changed the nature of the SMSF superannuation segment. It took the segment two years to regain composure after the 2017 tax shock and start growing again,” said Alex Dunnin, executive director of research and compliance at Rainmaker Information.
At the same time the number of SMSFs established each year fell one-third in 2018 and 2019, from about 30,000 per year to about 20,000 per year.
“There was a recovery in SMSFs being established in 2020-21 although in2021-22 SMSF establishments fell away again,” said Mr Dunnin.
“The net effect is that the total number of SMSFs is still increasing, but the rate is slowing.”
Mr Dunnin said what is more intriguing about the SMSF sector is that since 2017, transfers out of SMSFs have almost doubled from $5 billion to $10 billion per annum.
There is still a net inflow of money into SMSFs, however this has nearly halved from almost $10 billion in 2017 to $5 billion in 2022.
Further, over the past five years, SMSF funds under management have grown by 5.8 per cent per annum, significantly slower than the rest of the superannuation market that grew 6.6 per cent.
“Another major change within the SMSF sector was that even though the amount of retirement benefits paid out of them has been remarkably stable at about $31 billion per annum, the way this money is paid has changed significantly as SMSF members switch from pension payments to lump sums,” he said.
“In 2017 just 14 per cent were paid as lump sums, but this ratio has tripled to 42 per cent by 2022.
“SMSF members no longer seem to see their funds as the place to put their member contributions, but they clearly still see them as a very good place to store vast amounts of family-owned superannuation wealth.”
