SMSFs still the heartland of the mature and wealthy

Suggestions that young and naïve investors are rushing to set up self-managed super funds have been debunked by figures from the Australian Taxation Office.

Graeme Colley, director of technical and professional standards at SMSF Professionals' Association of Australia (SPAA), told SmartCompany that despite an increase in popularity with the younger generation, the latest statistics show SMSFs are still very much the heartland of the wealthy and the mature.

“From what we see, it’s still the 50 plus category,” says Colley.

The September ATO figures show the greatest proportion of SMSFs are funds of between $200,000 and $2 million. The number of funds within this range has risen from 63.9% in 2009-10, to 65.7% in 2012-13.

In contrast, funds under $150,000 have been in a decline over this four-period from 20.5% to 17.2%.

Colley says there has been unfounded media speculation young people were rushing into setting up SMSFs.

“What the industry didn’t want to see happen was people brashly going into SMSFs without seeing if it was the right option for them. But we are not seeing that from these figures,” says Colley.

Colley says while the popularity of SMSFs is certainly on the increase, there has been a “steady as she goes” approach to SMSF investment.

“It’s more of a ‘look before you leap’ situation, we don’t want a runaway freight train,” he says.

Colley believes there has recently been a considerable focus given to the education and training of SMSF managers, in the wake of changes to the financial planning industry.

He says the ATO statistics also put to bed the myth that SMSFs with low balances have an "unhealthy" concentration of their assets in residential property.

“That doesn’t seem to be the case. Funds with property investment seem to be in the $300,000-$400,000 plus range. It is a common sense investment, rather than people with massive mortgages.”

"The notion that SMSFs are piling into residential property with their ears pinned back is simply not supported by the ATO figures,” says Colley.

The SPAA expects another 20,000 SMSF will be created in 2015.

This article first appeared on SmartCompany.