Unveiling the Impact: Do the 2021-22 ATO Annual SMSF Statistics Reflect Legislative Shifts?

The Australian Taxation Office (ATO) has released its annual statistical report on Self-Managed Superannuation Funds (SMSFs) for the fiscal year 2021-22.

In analysing these statistics we reflect on legislative changes, particularly those that took effect on 1 July 2021, to assess the potential impact of these changes on the SMSF sector as well as contribution and membership structures.

For example, since 1 July 2021, SMSFs have been permitted to have up to six members but the latest ATO stats confirm that the majority of SMSFs have not taken advantage of the increased member limit. SMSFs with five or six members make up less than 0.2% of SMSFs as at 30 June 2022. Two-member SMSFs remain the preferred structure, accounting for 68.3% of the SMSFs while SMSFs with a single member made up 24.8% of funds as at 30 June 2022.

1 July 2021 also saw several key changes take effect with respect to superannuation contributions:

  • The SG rate increased to 10%, up from 9.5% in the previous year.
  • The standard concessional contributions (CCs) cap increased to $27,500, up from $25,000 in 2020/21.
  • Eligible individuals could potentially increase their personal CC cap to a maximum of $102,500 – using carried forward unused concessional contribution cap amounts from previous years.
  • The standard non-concessional contributions cap (NCCs) increased to $110,000 and the NCC cap under the three-year bring-forward rule rose to $330,000.

In light of these changes, it is hardly surprising that 2021-22 saw the level of contributions made to SMSFs increase. SMSFs experienced a 16% increase in total contributions, reaching $22 billion, with member contributions surging by 23% to $16.3 billion. Employer contributions also saw a modest rise of 1.8%, climbing to $5.7 billion in 2021-22.

Worth noting was that the biggest shift in member contributions, was for members aged 65 to 69. Again, not surprising with the abolishment of the work test for those under the age of 67 on 1 July 2020. This was further aided by the operation of the work test exemption, allowing one off personal contributions for eligible individuals who ceased work after reaching age 67.

We would envisage an even more significant increase in contribution levels from the 2022-23 year onwards – with the further relaxation of the work test on 1 July 2022 making it even easier for anyone up to the age of 75 to contribute to super and utilise their contributions caps.

As the superannuation system evolves, there has been a decrease in the proportion of SMSFs with balances below $200,000. It was pleasing to see that the vast majority (86%) of SMSFs had a balance greater than $200,000 in June 2022. This is consistent with research commissioned by the SMSF Association and conducted by the Uni of Adelaide, which identified that typically SMSFs with balances of $200,000 or more are cost effective compared with larger funds.

In fact, the latest lodgment data for the 2021–22 year indicates that the average assets of newly established SMSFs were $382,000, marking a slight reduction (2.5%) from $391,000 in 2020–21.

Despite the continually shifting legal and regulatory environment, SMSFs remain a long-term strategy for retirement planning, a fact underscored by the latest statistics showing that over two-thirds (64.7%) of SMSFs have been in operation for over a decade. Only 12.4% have been established within the last three years.

The long-term nature of an SMSF is also supported by the latest statistics on wind-ups which suggest that the average lifespan of an SMSF was 13 years. Furthermore, there was a reduction in the number of wind ups with approximately 14,700 SMSFs wound up in 2021–22, compared to an annual average of 18,500 for the five years to 2021–22.

Closer examination of the SMSFs that wound up in 2021–22 reveals that the average assets of SMSFs in the year before winding up increased to $603,000, compared to $492,000 in 2020–21. Also noteworthy is that 57% of funds wound-up in 2021–22 were in accumulation phase and 43% were in retirement phase. These numbers are a true reflection that SMSFs are not a one-size-fits-all solution.

For more on the ATO’s SMSF annual statistical overview and quarterly statistical reports click here.

Written by Mary Simmons,  Head of Technical