POWERED BY MOMENTUM MEDIA
How transfer balance caps have affected SMSF growth
According to Rainmaker research, the introduction of transfer balance caps (TBCs) could be resulting in decreased growth and contribution amounts into self-managed superannuation funds (SMSFs).
With the introduction of the TBC, the amount of tax-free retirement savings was limited to $1.6 million, with amounts above this threshold taxed at 15%.
This had “profoundly changed the nature of the SMSF superannuation segment”, said Alex Dunnin, Rainmaker executive director of research and compliance.
Since its introduction, voluntary top-up member contribution had declined 60%. Members contributed $38 billion in 2016/17 prior to the TBC’s introduction and they then fell sharply for two years.
In the most recent financial year, member top-up contributions were $15 billion as per figures from the Australian Prudential Regulation Authority (APRA).
“It took the segment two years to regain composure after the 2017 tax shock and start growing again,” Dunnin stated.
“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.”
Additionally, the number of SMSFs established fell one-third in 2018 and 2019, from some 30,000 per year to 20,000 per year, according to Rainmaker.
“There was a recovery in SMSFs being established in 2020/21 although in 2021/22 SMSF establishments fell away again,” Dunnin stated.
“The net effect is that the total number of SMSFs is still increasing, but the rate is slowing.”
Finally, the number of inflows into SMSFs had nearly halved from almost $10 billion in 2017 to $5 billion in 2022. This had led SMSF funds under management to grew by 5.8%, a slower pace than the 6.6% seen by the wider superannuation market.
AUTHOR
Rhea Nath
Rhea L Nath is a journalist on Super Review and InvestorDaily, with a focus on funds management, superannuation, and institutional investment. Previously, she covered small business and entrepreneurship news at Dynamic Business and multicultural issues at Indian Link Media Group. In 2022, she was named Young Journalist of the Year at the NSW Premier’s Multicultural Communications Awards.
Recommended for you
Super funds had a “tremendous month” in November, according to new data.
Australia faces a decade of deficits, with the sum of deficits over the next four years expected to overshoot forecasts by $21.8 billion.
APRA has raised an alarm about gaps in how superannuation trustees are managing the risks associated with unlisted assets, after releasing the findings of its latest review.
Compared to how funds were allocated to March this year, industry super funds have slightly decreased their allocation to infrastructure in the six months to September – dropping from 11 per cent to 10.6 per cent, according to the latest APRA data.
TOP PERFORMING FUNDS
ACS FIXED INT - AUSTRALIA/GLOBAL BOND
Fund name
3y(%)pa
1
Spire Oaktree Opportunities XI Second Close
61.07 3 y p.a(%)
2
Spire Oaktree Opportunities XI First Close USD
59.21 3 y p.a(%)
3
DomaCom Lot 21 Chellaston Road Munno Para West SA 5115 Australia
31.73 3 y p.a(%)
4
Fidante Credit Suisse Global Private Equity
30.15 3 y p.a(%)
5
DomaCom 4/27 Crombie Avenue Bundall QLD 4217 Australia
26.71 3 y p.a(%)
