10 Interesting Facts about DIY Super - dummies

By Trish Power

Trustees of self-managed superannuation funds control around a third of all superannuation money held in Australia. Continue reading to discover ten scintillating — and sometimes surprising — facts about DIY super funds, including self-managed super fund trustees.

2 types of DIY super funds exist

You can actually choose from two types of DIY super fund:

  • A self-managed superannuation fund (SMSF): The ATO regulates this type of DIY super fund. SMSFs are the most popular choice of DIY super fund with more than half a million SMSFs operating. Your fund must satisfy basic conditions to be considered a SMSF.

  • A small APRA fund: Financial organisations offer this product with a professional trustee and fewer than 3,000 small APRA funds exist. The Australian Prudential Regulation Authority (APRA) regulates this type of DIY super fund. APRA oversees the soundness of financial institutions and super funds (with the exception of SMSFs, which are regulated by the ATO). A small APRA fund is run by a trustee that holds a Registrable Superannuation Entity (RSE) licence — that is, a professional trustee approved by APRA. All super trustees of non-SMSFs must hold such a licence.

There are 1 million trustees and counting

More than 1 million Australians run SMSFs. Or to be precise, 1,023,964 SMSF trustees as at September 2014 (latest statistics available as at February 2015). Every year, nearly 30,000 new SMSFs join the club, which translates into nearly 60,000 new SMSF trustees, based on the average of 1.9 trustees per SMSF.

The average balance breaks the $1 million barrier

The average SMSF fund balance is $1,036,682 as at September 2014 (latest ATO information available in February 2015), but that doesn’t necessarily mean the average SMSF trustee is a millionaire. Most SMSFs have two members, and when you divide the $559 billion of SMSF assets into the number of members (1,023,965), the average account balance, rather than fund balance, is just over $545,000.

And some are millionaires

Just under a third (29.7 per cent) of all SMSFs own assets worth more than $1 million according to the ATO, with 12 per cent of SMSFs holding more than $2 million in assets. Even so, nearly half (48 per cent) of all SMSFs hold less than $500,000 in assets, with nearly a quarter (22.5 per cent) holding $200,000 or less in assets.

SMSF trustees love company

A SMSF can have up to four SMSF trustees but typically, a SMSF has two trustees who are usually husband and wife. According to the latest ATO statistics, more than two-thirds (69.5 per cent) of SMSFs have two members, just under a quarter (22.6 per cent) have a single member, and the remaining 8 per cent of SMSFs have three or four members.

3 asset classes dominate SMSF investment

Three-quarters (77 per cent) of all SMSF assets are invested in only three asset classes, based on ATO statistics. The three asset classes are: Australian listed shares, representing 32 per cent of SMSF assets; cash and term deposits (29 per cent); and direct property (16 per cent).

Another 18 per cent of SMSF money is invested in managed-type products. The remaining 5 per cent (plus 3 per cent of liabilities) is directed towards 12 investment categories, including overseas investments, limited recourse borrowing arrangements and artwork.

Most SMSF trustees live in the eastern states

Reflecting the general population, Victoria and New South Wales are heavily represented in the home states of SMSF trustees. Nearly two-thirds (62.9 per cent) of SMSF trustees live in New South Wales (31.9 per cent) and Victoria (31.0 per cent). Adding to the east coast popularity, another 16.5 per cent of SMSF trustees call Queensland home.

The remaining 20 per cent of SMSF trustees live in Western Australia (10.3 per cent), South Australia (7.0 per cent), the Australian Capital Territory (1.8 per cent), Tasmania (1.3 per cent) and the Northern Territory (0.2 per cent).

Most SMSF trustees are 45 years or older

More than 80 per cent of SMSF trustees are aged 45 years or older, with well over half (57.8 per cent) of all SMSF trustees being aged 55 years or over. A quarter (25.7 per cent) of all SMSF trustees are aged 65 years or over.

New SMSF trustees are much younger

Although SMSF trustees overall are mainly aged 45 years or older, when you examine the SMSF establishment statistics for the September 2014 quarter (latest available in February 2015), nearly half (43.3 per cent) of new SMSF trustees are under the age of 45, and three-quarters (75.2 per cent) of new SMSF trustees are under the age of 55.

SMSFs aren’t for everyone

For the 2014 financial year, 33,340 SMSFs were established while another 5,662 SMSFs were closed, according to ATO statistics. Although the reasons for SMSFs being wound up were not disclosed, typically such a decision is made if there are no more members in the SMSF due to death, no more money in the fund, or when transferring benefits to a large super fund. In some instances, a SMSF is not the best fit for the fund members and a decision is made to wind up the SMSF and transfer the assets to another super fund.