Warnings on dangerous superannuation comparisons
On the back of figures from the Australian Taxation Office (ATO) showing investment performance and fees for self-managed super funds (SMSFs), Graeme Colley, director, technical and professional standards of the SMSF Professionals' Association of Australia (SPAA), has pointed out how clear it is that comparing superannuation sectors is futile.
"The ATO specifically states that comparing the investment performance between SMSFs and other types of superannuation funds is fraught with danger," he said. "While methodologies may be comparable, the data collected from the different types of funds is not the same.
"It's similar with fees," Colley continued. "Comparing the operating expenses of SMSFs compared with other types of superannuation funds is difficult.
"While the ratios used in the ATO statistics may be comparable, the data collected from the different types of funds is not the same."
According to Colley, the ATO figures showed that in the 12 months to 30 June 2012, the expense ratios of SMSFs were about 0.56 per cent, falling to that level from 0.69 per cent over the five years to 2012.
"This decrease reflects the increase in the asset sizes of SMSFs over the period as well as increased competition in the market for audit, accounting and administration services for SMSFs," he said. "Average operating expenses have increased over the same period and are estimated to be $5,600.
"(But) due to the fixed costs of operating a fund, SMSFs with lower balances have higher average expense ratios - 9.5 per cent for SMSFs with a balance of $50,000, to less than 1 per cent for SMSFs with assets of more than $500,000."
Indeed for Colley, the rates of return of SMSFs showed a direct relationship with the relative size of the SMSF - the larger the SMSF, the greater the return on assets.
Originally published by SMSF Essentials.
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