SMSF contribution levels almost triple in response to super changes becoming law

AMP says SMSF trustees looking to make the most of the current rules have significantly increased contributions, according to the latest SuperConcepts SMSF Investment Patterns Survey.

In the December 2016 quarter contribution levels almost tripled, increasing by 181 per cent from $3,040 in the September quarter to $8,550.

 

The rise in contributions follows the Government’s confirmation that the proposed Super changes will come into effect on July 1 2017.

SuperConcepts Executive Manager Technical & Strategic Solutions Phil La Greca said the findings were not surprising and he anticipated contribution levels would continue to increase during the next two quarters due to the brief window of time to make large non-concessional contributions until 30 June 2017.

“The current non-concessional amounts apply for the remainder of this financial year and investors are taking advantage of the limited time available to them. We expect a continued uplift in the level of nonconcessional contributions in the lead up to July 1,” said Mr La Greca.

The current $180,000 after-tax contributions cap, and the three year $540,000 bring-forward rule remain until 30 June 2017.

Cash levels were also up in Q4 (from 18.1 per cent in the September quarter to 18.4 per cent in the December quarter).

Mr La Greca said it was likely the increased cash levels were related to the higher contribution levels being received.

The trend to invest through the use of exchange-traded funds (ETFs) continued to grow, with ETFs representing four per cent of all assets during the December quarter. ETFs were mostly used in the International Equity Sector, which represented 16.7 per cent of all international equity holdings.

The trend to use a limited recourse borrowing arrangement for property continued. The overall allocation to property loans increased to 81 per cent in the December quarter, up from 75 per cent the previous quarter. Meanwhile the number of financial asset loans decreased from 25 per cent to 19 per cent.

“The ATO’s safe harbour guidelines on related party loans explains the continued drop in the number of financial asset loans,” said Mr La Greca.

The quarterly SuperConcepts SMSF Investment Patterns Survey covers approximately 2,800 funds, a sample of SMSFs administered by Multiport (part of the SuperConcepts group) and the investments they held at 31 December 2016. The assets of the funds surveyed represent approximately $3.2 billion.

About SuperConcepts<
SuperConcepts is a leading provider of self-managed superannuation fund (SMSF) administration, software and education services to SMSF trustees, accountants and financial advisers, servicing more than 55,000 funds. SuperConcepts comprises a number of sub-brands including AMP SMSF, Ascend, Cavendish, Multiport, Justsuper, SuperConcepts, SuperIQ, superMate, yourSMSF and a part ownership of Class Ltd. Find out more at www.superconcepts.com.au.

 

Do Investment Property Investors Also Use SMSF’s?

We recently featured our analysis of Portfolio Property Investors, using data from our household surveys. We were subsequently asked whether we could cross correlate property investors and SMSF using our survey data. So today we discuss the relationship between property investors and SMSF.  We were particularly interest in those who hold investment property OUTSIDE a SMSF.

To do this we ran a primary filter across our data to identity households who where property investors, and then looked at what proportion of these property investors also ran a SMSF. We thought this would be interesting, because both investment mechanisms are tax efficient investment options.  Do households use both? If so, which ones?

We found on average, around 13% of property investors also have a self managed super fund (SMSF). Households in the ACT were most likely to be running both systems (17%), followed by NSW (14%) and VIC (12.8%).

Older households working full time were more likely to have both an SMSF and Investment Property, but we also noted a small number of younger households were also using both tax shelters.

We found a significant correlation between income bands and use of SMSF among investment property holders (this does not tell you about the relative number of households across the income bands, just their relative mix). Up to 30% of higher income banded households have both a SMSF and Investment Property.

Finally, we look across our master household segments. These segments are the most powerful way to understand how different household groups are behaving.  The most affluent groups tend to hold both investment property and SMSF – for example, 30% of the Exclusive Professional segment has both.  Less affluent households were much less likely to run a a SMSF.

This shows that more affluent households are more able and willing to use both investment tax shelter structures. It also shows that any review of the use of negative gearing, investment properties and the like, needs to be looked at in the context of overall tax planning. Given the new limits on superannuation withdrawals, we expect to see a further rotation towards investment property, which as we already explained has a remarkable array of tax breaks and incentives. We expect the number of Portfolio Property Investors to continue to rise whilst the current generous settings exist.

Pooled funds beat SMSFs for all but the wealthiest

From The NewDaily.

Most self-managed superannuation fund owners would have made more money investing in industry super funds in the seven years to 2015, according to a new report from the University of Adelaide’s International Centre for Financial Services.

Analysis by The New Daily based on figures produced for the review, which looked at SMSF’s in four bands of value from under $200,000 to over $1 million, found that over the seven years to June 2015 only the largest of SMSFs outperformed pooled funds.

Source:ICFS and Chant West

The top performing SMSF category, those with over $1 million in their fund, averaged 6.8 per cent returns in the seven years to 2015 while the next best performer, industry funds, averaged 6.2 per cent and retail funds

Small SMSFs with less than $200,000 invested on average lost 5.2 per cent a year over the seven years, something their owners would not have been happy with.

The two mid-tier levels of SMSFs both outperformed retail funds, which scored 3.4 per cent but came in behind industry funds, which racked up an annual return average of 6.4 per cent over the seven years. The average for all SMSF’s in the survey was 3.7 per cent over seven years.

Super changes to knock SMSFs from their perch

The performance outcomes reflect the makeup of different fund types. Retail funds with their high equity ratings outperform in years where the share market is strong and underperform, sometimes dramatically, when equities slump.

The hare and the tortoise

Industry funds, with their larger exposure to direct property, infrastructure and private equity, are steadier performers than retail funds, enabling them to perform better over time. Larger SMSF’s were less volatile than retail funds, probably reflecting their higher propensity to invest in property.

Steady progress wins out. Photo: GettySteady progress wins out. Photo: Getty

The costs of running SMSF’s hit hard at the performance of smaller funds. Expenses for the smallest funds were as high as 6.8 per cent of fund value while for the largest they were as little as 0.6 per cent and averaged 0.9 per cent. These expenses include accountancy, legal costs and investment advice.

Figures for pooled funds provided by SuperRatings show that Fee Quartiles for pooled funds range from 0.76 per cent to 1.26 per cent for funds over $500,000 and 0.9 per cent and 1.5 per cent for $50,000 funds. Industry funds tend to be at the lower of these ranges with retail funds at the upper end although for-profit My Super funds are also at the lower range.

You need big bucks for an SMSF

David Simon, principal of advisory house Integral Private Wealth, told The New Daily that while it was arguable that SMSF’s could be viable with balances of $250,000 “they’d generally need to be between $400,000 and $500,000 to be properly diversified and make use of the extra investment choice that SMSFs offer.”

Industry and retail funds increasingly offer members the capacity to invest in individual stocks, term deposits and sector specific funds so “the attractiveness bar that SMSF’s have to get over is higher than before,” Mr Simon said.

Professor Ralf Zurbrugg of the University of Adelaide, an author of the report, said while benefits of  size for SMSFs faded quickly once balances reached $500,000. “Above that level performance [resulting from lower running costs] saw only marginal improvement,” he said.

Mr Simon said SMSF’s with smaller balances could be viable to “fill particular trustee needs. For example where a small business person may want to put a part of their work building into their super fund so they pay rent to their fund not a landlord”.

The latest superannuation statistics published by the Australian Prudential Regulation Authority this week show that super balances have grown slightly to $2.1 trillion with SMSF’s accounting for 29.5 per cent of assets.

Super Grew in the year to June. Source: APRASuper Grew in the year to June. Source: APRA

However SMSF’s remain a bastion of super privilege with their 1 million members having average balances of $572,000 while the 11.1 million industry super fund members have average balances of $39,000. The 12 million retail fund members have average balances of $42,000 while 3.5 million public sector fund members have average balances of $150,000.

The New Daily is owned by industry super funds

When Size Matters: $200,000 threshold key to SMSF performance

AMP says large SMSFs perform better than small SMSFs because they are more diversified, operate more effectively and have longer experience in the sector.

This is according to new joint research from SuperConcepts and the University of Adelaide’s International Centre for Financial Services.

Released today, the new research report –When size matters: A closer look at SMSF performance – looks at fund characteristics that contribute to superior performance of SMSFs.

SuperConcepts General Manager of Technical Services and Education, Peter Burgess, said the research revealed when a fund reaches a balance of $200,000, the benefits of investment diversification start to kick in.

“Our research shows size matters with large SMSFs performing better than small ones. Performance, diversification and expense ratios continue to improve as a fund increases in size,” said Mr Burgess.

Professor Ralf-Yves Zurbrugg from the University of Adelaide said there is a “double whammy” for those SMSFs with balances under $200,000.

“These funds not only have much larger expense ratios compared to larger funds, but they also lose out due to their inability to achieve adequate levels of investment diversification,” said Professor Zurbrugg.

Large funds are more efficient in their operation, in terms of the direct expenses involved in managing an SMSF. When a fund reaches $550,000 under management, its expense ratio dips below two per cent and diversification and performance is comparable to the largest funds.

When size matters: A closer look at SMSF performance is the first in a series of reports to be released by the SMSF Centre of Excellence which aims to examine the relationship between fund activity and performance, diversification and performance, and the relationship between trustees seeking advice andperformance.

Using data from over 20,000 SMSFs from 2008/09 until 2014/15, the report examines how fund size affects performance as well as other fund characteristics including investment diversification and expense ratios. SMSFs in the data set have outsourced their administration, and possibly other aspects of their operation to an external party.

 

Super assets reaches $2.1 trillion

From InvestorDaily.

Australia’s retirement savings system grew to $2.1 trillion by the middle of 2016, according to new statistics published by APRA

In its Annual Superannuation Bulletin, released yesterday, APRA revealed total assets hit $2.1 trillion as at 30 June 2016.

Of that total, $621.7 billion (29.6 per cent) was held in SMSFs and $1.29 trillion was held by APRA regulated superannuation entities.

The remaining $185.5 billion comprised exempt public sector superannuation schemes ($132.2 billion) and the balance of life statutory funds ($53.3 billion).

Retail funds held 26 per cent of the total $2.1 trillion; industry funds held 22.2 per cent; public sector funds held 17 per cent and corporate funds held 2.6 per cent.

As at 30 June 2016, there were 144 APRA-regulated RSE licensees responsible for managing funds with more than four members.

Of the funds with more than four members, the annual rate of return for the year ended June 2016 was 2.9 per cent. The five-year average annualised rate of return to June 2016 was 7.4 per cent and the 10-year rate of return was 4.6 per cent.

Australian superannuation members paid $11.72 billion in fees for the 12 months to 30 June 2016, according to APRA.

Super Now Worth $2.15 Trillion

APRA has released the latest superannuation statistics to September 2016. Total superannuation assets are worth $2,145.6 billion up +7.4% in the past year. Of this, $1,330.5 billion are in entities regulated by APRA, up 8.7% in the past year.

apra-superSelf managed superannuation balances reached $635.9 billion, up +8.0% in the past year.

apra-super-sept-2016-smsf

Total assets in MySuper products totalled $492.2 billion at the end of the September 2016 quarter. Over the 12 months from September 2015 there was a 13.6 per cent increase in total assets in MySuper products, and a 23.7 per cent decrease in total assets in accrued default amounts to $39.6 billion.

There were $23.2 billion of contributions in the September 2016 quarter, down 4.7 per cent from the September 2015 quarter ($24.4 billion). Total contributions for the year ending September 2016 were $103.1 billion. Outward benefit transfers exceeded inward benefit transfers by $1.0 billion in the September 2016 quarter.

There were $17.0 billion in total benefit payments in the September 2016 quarter, an increase of 6.6 per cent from the September 2015 quarter ($15.9 billion). Total benefit payments for the year ending September 2016 were $65.7 billion. Lump sum benefit payments ($8.3 billion) were 49.1 per cent and pension benefit payments ($8.6 billion) were 50.9 per cent of total benefit payments in the September 2016 quarter. For the year ending September 2016, lump sum benefit payments ($33.0 billion) were 50.2 per cent and pension payments ($32.7 billion) were 49.8 per cent of total benefit payments.

Net contribution flows (contributions plus net benefit transfers less benefit payments) totalled $5.3 billion in the September 2016 quarter, a decrease of 30.4 per cent from the September 2015 quarter ($7.6 billion). Net contribution flows for the year ending September 2016 were $31.7 billion.

 

ASIC Cancels the Registration of 133 SMSF Auditors

ASIC has cancelled the registration of 133 approved self-managed superannuation fund (SMSF) auditors who did not lodge their annual statements.

Audit-Pic

On 28 July 2016, ASIC sent a final warning to 185 approved SMSF auditors with outstanding annual statements. ASIC had alerted these auditors on a number of occasions that their registration would be cancelled if their outstanding statements were not lodged with fees paid.

SMSF auditors have had ample time to come to grips with their responsibilities. Auditors who do not ensure that they are aware of and meet their obligations face the risk of losing their registration. An unregistered auditor is not permitted to audit an SMSF. Conducting an audit of an SMSF when not permitted to do so may have further serious consequences for the fund and the auditor.

Approved SMSF auditors can confirm if they have lodged annual statements or update their contact details by accessing their ASIC Connect account.

SMSF trustees and members can check whether their auditor is registered, or whether a person has been disqualified, by searching ASIC’s SMSF Auditor register.

Background

From 1 July 2013, the Superannuation Industry (Supervision) Act 1993 required all auditors of SMSFs to be registered with ASIC. This was to ensure that all SMSF auditors at least meet the base standards of competency and expertise.

ASIC and the ATO work closely together as co-regulators of SMSF auditors. The ATO monitors SMSF auditor conduct and may refer matters to ASIC for possible action such as disqualification or suspension of their registration.

Approved SMSF auditors need to lodge an annual statement with ASIC within 30 days of the annual anniversary of their registration. ASIC sends email notifications on anniversary dates advising that annual statements are ready for completion. If an extension of time to lodge the annual statement is required, a written request to ASIC must be made before the due date. An annual statement is not considered to be lodged until the required lodgement fee has been paid.

ASIC notified 811 approved SMSF auditors that they had not met their annual statement requirement and that ASIC may cancel their registration. This included 95 auditors that had lodged annual statements but had not paid their lodgement fee. 626 auditors subsequently lodged their annual statement or paid outstanding fees.

Changes to approved SMSF auditor contact details, including email and mailing addresses, must be provided to ASIC within 21 days of the change occurring. There is no fee to update these details.

Approved SMSF auditors seeking to cancel their registration voluntarily can do so by completing a cancellation request form, available on ASIC’s website.

SuperConcepts acquires software funds in strategic alliance with Reckon

SuperConcepts has announced the acquisition of Reckon’s Desktop Super platform, which will see the transition of approximately 16,000 SMSF software clients to the SuperConcepts business.

The acquisition continues SuperConcepts’ growth as a provider of SMSF software services to accountants and specialist SMSF advisers, increasing its market share across both administration and software services from 6.8 to 9.7 per cent.

SHare-GrapghSuperConcepts and Reckon have also formed a strategic alliance to leverage each other’s expertise and industry relationships to provide customers with a leading SMSF software service.

Natasha Fenech, CEO SuperConcepts said the acquisition and strategic alliance is another step forward ingrowing the SuperConcepts business as a leading end-to-end service provider in the SMSF market.

“Reckon is a highly-regarded provider of accounting software services. We’re excited to form an alliance that will help us to enhance the level of service and technology available to SMSF trustees and their advisers.

“SMSF software continues to be a key part of our strategy and we will continue to invest in the technology as we expand our service to become a market leader in SMSF software solutions and partner of choice forthe SMSF industry,” she said.

In-line with its strategy, SuperConcepts has continued to build scale in the SMSF market as an end-to-end provider of administration, software and education services to SMSF trustees, accountants and financial advisers.

Sam Allert, Managing Director Reckon for Australia and New Zealand said: “Our strategic alliance with SuperConcepts ensures Reckon is providing the best value SMSF software solution to our clients going forward. We’re thrilled to be to working with a leading brand in the SMSF administration market and this is just the start of a powerful partnership.”

Desktop Super customers will not notice any immediate change to the way they access their funds.

About SuperConceptsSuperConcepts is a leading provider of self-managed superannuation fund (SMSF) administration, software and education services to SMSF trustees, accountants and financial advisers, servicing more than 40,000 funds.SuperConcepts comprises a number of sub-brands including AMP SMSF, Ascend, Cavendish, Multiport, Justsuper, SuperConcepts, SuperIQ, superMate, yourSMSF and a part ownership of Class Ltd. Find out more at www.superconcepts.com.au.

About ReckonReckon is an ASX listed and Australian owned company with over 25 years’ experience delivering market leading solutions to accountants and bookkeepers, legal professionals and small to medium sized businesses. Reckon’s software solutions are designed to make accounting faster, easier and more productive. Find out more at www.reckon.com.

 

SMSFs Outstrip Retail Investors

CommSec analysis has found self managed super fund (SMSF) investors trade twice as often and hold more diverse portfolios than retail investors.

CommSec data has found that SMSFs place double the amount of equities trades on average compared to non-SMSF holders.

Marcus Evans, Head of SMSF Customers, Commonwealth Bank said: “SMSFs are very active in the equities space. Many people often view SMSF accounts as dormant with a lot of long-term investments, however CommSec data shows that this isn’t the case.”

In terms of portfolio make-up, SMSFs have a far more diversified portfolio, holding an average of 14 different securities in their portfolio, compared to just seven for the average equities investor.

“SMSF accounts tend to be far more diversified than those of retail investors, recognising that diversification is an important part of reducing risks and managing a robust portfolio over the long-term,” Mr Evans said.

An analysis of CommSec SMSF trading patterns for the week ending 28 August 2015, which included the biggest single day drop since the GFC, shows an increase in total trade volumes, with overall net buying among SMSFs.

“The increase in trading volumes favouring buying during recent volatility shows investors are constantly keeping an eye on the market and dispels the myth that SMSFs are conservative investors,” Mr Evans said.

In addition to portfolio diversification, SMSFs also hold equities across a broad range of industries, with more than 20 sectors represented. Bank holdings are the most popular equities, making up more than 30 per cent of SMSF holdings, followed by Materials (10 per cent), Telecommunications services (7.3 per cent), Diversified Financials (5.8 per cent) and Food & Staples (5.7 per cent).

“SMSFs are continuing to grow and diversify their portfolios, however equities comprise just one asset class. To have a truly diverse portfolio SMSFs need to look across asset classes for broad investment opportunities,” Mr Evans said.

Property Group Spruiking SMSF Property Punished

Following ASIC action, the Supreme Court of NSW found Park Trent Properties Group Pty Ltd (Park Trent) had been unlawfully carrying on a financial services business for over 5 years by providing advice to clients to purchase investment properties through a SMSF.

In his judgment, his Honour Acting Justice Sackville said it was in the public interest that Park Trent be restrained from carrying on a financial services business.

ASIC launched legal proceedings in November 2014 against Park Trent who, by the time of the trial in June 2015 had advised over 860 members of the public to establish and switch funds into an SMSF.

In handing down his judgment, his Honour observed that Park Trent’s business model depended on “persuading relatively unsophisticated investors of the virtues of using their superannuation accounts to purchase investment properties and to establish SMSFs… Investors were influenced to make important decisions concerning their superannuation strategy with little or no genuine consideration of whether the decision took proper account of their individual financial circumstances. Some suffered financial loss as a consequence.”

His Honour also referred to the role of Park Trent’s CEO, Ronald Cross and referred to his “willingness to ignore legal advice as to the nature of Park Trent’s statutory obligations.”

His Honour said that his decision “serves as a warning to others who conduct or propose to conduct businesses which seek to influence clients to establish SMSFs for investment purposes, without having the necessary licence to do so.”

ASIC Deputy Chairman Peter Kell said: ‘This outcome demonstrates the courts, ASIC and the public will not tolerate this type of unscrupulous behaviour.

‘Property spruikers who recommend people invest in property via SMSFs, or facilitate such an investment, and who do not have an Australian financial services licence are breaking the law.

ASIC’s message is that anyone recommending or facilitating SMSFs as a way of investing in property will need to have a licence and provide appropriate advice that prioritises the client’s interests.

‘It is important that advisers who deal with SMSFs are appropriately licenced because the important safeguards and standards that come with being licenced are in place for a sector which is of growing importance to more Australian investors.’

The parties have until 29 October 2015 to file submissions on the form of final orders.