(03) 9020 2905PORTFOLIO POINT: Watch out, Canberra. The army is growing. Annoy them at your peril in this election year.
With due deference to Paul Hogan (who was talking about knives in the original Crocodile Dundee): “That’s not an army. THIS is an army!”
If the nation’s political leaders are considering aggravating SMSF trustees, they might want to check the numbers first.
Sometime, around about now, our SMSF army hit a major milestone.
The number of SMSFs in existence most likely hit 500,000 in February, according to figures from the Australian Tax Office. At December 31, there were 496,028 SMSFs. In recent history, they have been growing at 3000 a month, or about four an hour. Allowing for the usual Christmas and January slowdown, the number should have roughly topped 500,000 … well, pretty much today.
But that’s just SMSFs themselves. Each fund has an average of 1.9 members. We’ll hit the magic million member mark, according to my extrapolation of those numbers, in the second half of September, around the time of this year’s federal election.
Keep that in mind, Canberra.
Particularly if you decide that you want to target individuals with larger superannuation balances, such as those with more than $1 million in super. And those rumours only seem to be growing stronger in that period of time we’re now in, in which budget wish-lists are being kicked around. They’re considering taxing higher-balance super funds – which would pointedly hit SMSFs harder than APRA-fund members – at higher rates, though we haven’t seen enough detail yet.
Superannuation will be a bit of a battleground this year. It’s unlikely to be front-page news, but both sides of politics are going to be spruiking their credentials.
Labor is raising the Superannuation Guarantee levy from 9% to 12% (over a number of years, starting on 1 July, 2013), which was to be funded by the mining super profits tax (oops!) while the Coalition is promising not to make super any worse in its first year in office, a promise that’s been broken too often for us to place much faith in.
What we’d love to hear is how superannuation is going to be made better. Unfortunately, they don’t seem to be the cards in anyone’s hands.
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Both the ATO figures and figures out from the Australian Prudential Regulatory Authority show the increasing clout that SMSFs have.
The new converts continue to get younger too. Nearly 40% of new SMSF trustees are aged 44 or less. The average age is around 50.
Women make up nearly half of all new members, at 47%. And the median income would be about the same as the “average” in the population, though the largest, by pure weight of numbers, are in the $100,000-$200,000 range.
SMSFs control 33% of all superannuation assets.
With 496,000 members on December 31, and total assets of around $474.4 million, we’re agonisingly close to the “average” super fund being worth $1 million.
Depending on the continued strength of equity markets, the $1 million average super fund could also happen this year.
Equities are back as top of the pops again – probably largely more to do with the growth in equity values since the middle of last year than deliberate asset allocation.
In June last year, the single largest asset held was cash, with $130.8 million. As at 31 December, that had grown to $135.8 million.
Over the same period, the value of equity holdings in SMSFs had grown from $127.6 million to $150.1 million, an increase of 17.6%.
However, those figures suggest that even as equity markets were rising, SMSF trustees were easing up their allocations to shares.
Share prices over that period rose, roughly, 20%, including a bit in dividends and distributions. That it is roughly the same as the increase in equities suggests that, net, we put no new money into equities.
Given that it’s made up of averages, many of you were continuing to withdraw from equities, as others were pumping money in, as the market was making a long-awaited comeback (I was certainly in the camp of the latter), which we certainly hope will continue to canter on for a little longer.
The ATO’s stats don’t seem to back up Multiport’s figures that I mentioned in a recent column. But that might be because the ATO stats don’t seem to record, or not obviously so, the amount of gearing undertaken by SMSFs.
The amount of money invested in residential property continues to grow, but did not grow above the growth in investments in other asset classes. Over the six months to the end of the year, overall assets in SMSFs increased by nearly 9%, while residential property assets increased by only 4.1%.
It would be reasonable to assume, however, that if those properties that have been geared begin to take off in value, that we’ll see a considerable rise in the net value invested in residential property, in particular.
But in the meantime, SMSFs continue to grow more and more powerful.
Though perhaps not as in-your-face as the National Rifle Association’s famous slogan, perhaps we SMSF trustees need to start showing some solidarity and have some bumper stickers made up.
“I’m a SMSF trustee. And I vote.”
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The information contained in this column should be treated as general advice only. It has not taken anyone’s specific circumstances into account. If you are considering a strategy such as those mentioned here, you are strongly advised to consult your adviser/s, as some of the strategies used in these columns are extremely complex and require high-level technical compliance.
Bruce Brammall is director of Castellan Financial Consulting and the author of Debt Man Walking. E: bruce@castellanfinancial.com.au