Industry funds expecting to reap the benefits of disillusioned SMSF members winding up their funds and re-joining the APRA-regulated sector are grasping at straws, says SuperGuardian, Xpress Super CEO Olivia Long.
Australian Taxation Office (ATO) figures for the five years to 30 June 2013 show that, on average, for every five SMSFs established, one was wound up, with gross SMSF establishments of 34,800 a year and wind-ups of 7800 a year.
Long says these numbers would clearly suggest that SMSFs are increasing in popularity, with growth over this five-year period of more than 27%, with the ATO ascribing it to improved community confidence in the economy and the adaptability of the SMSF sector.
“This hardly presents a picture of disillusionment,” she says.
She was responding to statement by Care Super CEO Julie Lander that SMSF trustees and members “were increasingly finding it a costly and time-consuming exercise they misunderstood before setting up. Worse still, closing an SMSF can be a very labor intensive and technical process.”
She expects the number of DIY investors looking to wind up their SMSFs to grow and a service to aid wind-ups will spur that process along.
Long says it’s always amazing how the retail and industry funds point to the number of wind-ups and conclude that suddenly the SMSF sector is losing its appeal when, quite clearly, the figures suggest the exact opposite.
“In addition, it is often implicit in their statements that trustees are quitting their SMSFs because of complexity, time, or because they have been closed down by the ATO.
“No doubt these are causes of some SMSFs being wound up. But I can add three other valid reasons that often apply:
· Death or ageing of a trustee. With more 55% of SMSF members over age 55, this is likely to be the cause of a larger number of natural wind ups;
· The taxation benefits of the SMSF are no longer relevant for retirees so they draw out the money and invest personally;
· People move overseas – at which point they roll over to an APRA-regulated fund as the easiest option.
“The reality is there is no hard and fast data on why SMSFs are being wound up. What we do know, conclusively, is that far more are being established than are being closed down, and the vast majority of these new SMSF members are coming from the ranks of the APRA-regulated funds,” Long says.
