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Investment profile

How SMSF investment performance is tracking.

Last updated 24 February 2022

Investment performance

SMSFs achieved positive returns for the past five years, with an estimated average 0.7% return on assets in 2019-20.

In this report, we have updated the methodology used to calculate SMSF investment performance. This is an indicator of performance across the entire SMSF sector and is not a direct comparison to APRA fund investment performance as the data inputs and methodology used are different.

The estimated SMSF return on assets (ROA) continues to show a direct relationship to SMSF size. Generally, the larger the SMSF asset holding, the higher the ROA:

  • The proportion of SMSFs recording a zero or negative ROA improved from 48% in 2015–16 to 26% in 2018–19, but then plummeted to 61% in 2019–20. This drop in 2019–20 is most likely due to the effect of COVID-19 on financial markets during the last quarter of the 2020 financial year.
  • The proportion of funds with an ROA of greater than 5% increased from 18% in 2015–16 to 46% in 2018–19, then dropped to 16% in 2019–20.
  • In 2019–20 the average ROA for SMSFs was 0.7%, down from 7.3% in 2018–19 and 3.7% in 2015–16.
  • In 2019–20 the median ROA for SMSFs was -1.6%, down from 4.3% in 2018–19, and 0.2% in 2015–16.

Graph 5: Average and median returns for SMSFs, 2015–16 to 2019–20

Bar graph shows the average and median returns for SMSFs from the 2016 financial year to the 2020 financial year from data table 23. In the 2016 financial year the average return for SMSFs was 3.7% and the median return for SMSFs was 0.2%. In the 2017 financial year the average return for SMSFs was 11.3% and the median return for SMSFs was 5%. In the 2018 financial year the average return for SMSFs was 8% and the median return for SMSFs was 4%. In the 2019 financial year the average return for SMSFs was 7.3% and the median return for SMSFs was 4.3%. In the 2020 financial year the average return for SMSFs was 0.7% and the median return for SMSFs was -1.6%.

See table 23 and table 24 of the Data tables (XLXS 611KB)This link will download a file.

SMSF expenses

In 2019–20:

  • the average total expense ratio was 1.16% or $15,300, down 4% from $15,900 in 2018–19, and up 10% from $13,900 in 2015–16
  • median total expenses were $8,200, the same as in 2018–19, and up 16% from $7,100 in 2015–16
  • SMSFs in retirement phase incurred lower average total expenses ($14,300) than funds solely in accumulation phase ($16,100)
  • average operating expenses were $6,200, down from $6,400 in 2018–19, and the same as 2015–16. The average operating expense ratios were 0.47%, 0.5% and 0.57% respectively.
  • median operating expenses were $4,000, the same as 2018–19 and up from $3,900 in 2015–16.

While the average total expense ratio is highest for lower balance SMSFs, the total dollar value of average and median expenses increased as fund size increased. For example, in 2019–20:

  • in the $1 to $50,000 asset range the average total expense ratio was 17.6%, average expenses were $4,400 and median expenses were $2,000
  • in the greater than $2 million asset range the average total expense ratio was 0.7% but average expenses were $28,600 and median expenses were $15,900.

Graph 6: SMSF average and median expenses and total borrowings, 2015–16 to 2019–20

Bar graph showing average and median expenses and total borrowings from the 2016 financial year to the 2020 financial year from data tables 25 and 28. In the 2016 financial year the average expenses were $13,900 and the median expenses were $7,100 and total borrowings were $20,800 million. In the 2017 financial year the average expenses were $14,100 and the median expenses were $7,200 and total borrowings were $23,200 million. In the 2018 financial year the average expenses were $15,000 and the median expenses were $7,700 and total borrowings were $24,500 million. In the 2019 financial year the average expenses were $15,900, the median expenses were $8,200 and total borrowings were $25,100 million. In the 2020 financial year the average expenses were $15,300, the median expenses were $8,200 and total borrowings were $23,800 million.

Interest expense within Australia has dropped from 2018–19 to 2019–20. This follows several years of steady growth due to the rise in SMSF investment in LRBAs. In 2019–20, 11.3% of SMSFs reported an LRBA, down slightly from 11.6% in 2018–19, and up from 7.4% in 2015–16. Borrowings also decreased as a result of the drop in investment in LRBAs, from $25.1 billion in 2018–19 to $23.8 billion in 2019–20, leading to decreasing average and median interest expenses within Australia. In 2019–20 almost 95% of borrowings were for LRBA purposes.

The following graphs show a breakdown of expenses reported by SMSFs by the asset range of the fund in 2019–20. The first graph shows that in general the average expense for each expense type rises as the size of the fund increases. A noticeable exception is overseas interest expenses and forestry managed investment scheme expenses due to the small population reporting expenses at this label. The second graph shows a similar trend for median expenses except for interest (both Australian and overseas), where SMSFs with balances up to $1 million have higher median interest expenses than larger funds.

Graph 7a: Average expense by expense type and asset range, 2019–20

Line graph showing the average expenses by asset range for the 2020 financial year from data table 25. For transparency, Other deductions have been excluded from Operating costs in the graph. Operating costs includes SMSF auditor fee, management and administrative expenses and the supervisory levy. In the $1-$50k asset range, interest expense within Australia was $10,155, interest expense overseas was $9,834, insurance premiums were $6,772, investment expenses were $2,637, forestry managed investment scheme expense was $4,403, other deductions were $1,110 and operating costs were $2,413. In the >$50k-$100k asset range, interest expense within Australia was $11,580, interest expense overseas was $7,830, insurance premiums were $4,817, investment expenses were $3,852, forestry managed investment scheme expense was $1,952, other deductions were $1,340 and operating costs were $2,598. In the >$100k-$200k asset range, interest expense within Australia was $12,469, interest expense overseas was $9,870, insurance premiums were $4,964, investment expenses were $5,789, forestry managed investment scheme expense was $4,195, other deductions were $1,502 and operating costs were $3,097. In the >$200k-$500k asset range, interest expense within Australia was $13,933, interest expense overseas was $11,914, insurance premiums were $5,834, investment expenses were $6,497, forestry managed investment scheme expense was $5,196, other deductions were $1,539 and operating costs were $3,805. In the >$500k-$1m asset range, interest expense within Australia was $15,767, interest expense overseas was $17,321, insurance premiums were $7,540, investment expenses were $7,270, forestry managed investment scheme expense was $4,293, other deductions were $1,862 and fixed administrative costs were $4,792. In the >$1m-$2m asset range, interest expense within Australia was $17,542, interest expense overseas was $20,611, insurance premiums were $9,513, investment expenses were $9,518, forestry managed investment scheme expense was $5,402, other deductions were $2,208 and operating costs were $6,063. In the >$2m asset range, interest expense within Australia was $29,025, interest expense overseas was $21,737, insurance premiums were $12,865, investment expenses were $21,526, forestry managed investment scheme expense was $19,809, other deductions were $5,659 and operating costs were $9,183.

Graph 7b: Median expense by expense type and asset range, 2019–20

Line graph showing the median expenses by asset range for the 2020 financial year from data table 25. For transparency, Other deductions have been excluded from operating costs in the graph. Operating costs includes SMSF auditor fees, management and administrative expenses and the supervisory levy. In the $1-$50k asset range, interest expense within Australia was $10,564, interest expense overseas was $9,834, insurance premiums were $3,935, investment expenses were $140, forestry managed investment scheme expense was $3,735, other deductions were $262 and operating costs were $1,909. In the >$50k-$100k asset range, interest expense within Australia was $11,918, interest expense overseas was $8,478, insurance premiums were $3,189, investment expenses were $737, forestry managed investment scheme expense was $1,987, other deductions were $313 and operating costs were $2,160. In the >$100k-$200k asset range, interest expense within Australia was $12,551, interest expense overseas was $9,303, insurance premiums were $3,591, investment expenses were $4,426, forestry managed investment scheme expense was $1,972, other deductions were $408 and operating costs were $2,613. In the >$200k-$500k asset range, interest expense within Australia was $13,089, interest expense overseas was $10,113, insurance premiums were $4,359, investment expenses were $5,084, forestry managed investment scheme expense was $2,139, other deductions were $360 and operating costs were $3,190. In the >$500k-$1m asset range, interest expense within Australia was $12,839, interest expense overseas was $11,342, insurance premiums were $5,499, investment expenses were $5,400, forestry managed investment scheme expense was $2,107, other deductions were $259 and operating costs were $3,656. In the >$1m-$2m asset range, interest expense within Australia was $11,524, interest expense overseas was $10,096, insurance premiums were $6,552, investment expenses were $6,765, forestry managed investment scheme expense was $2,940, other deductions were $259 and operating costs were $4,218. In the >$2m asset range, interest expense within Australia was $6,844, interest expense overseas was $706, insurance premiums were $8,238, investment expenses were $11,447, forestry managed investment scheme expense was $5,064, other deductions were $259 and operating costs were $5,594.

See table 25, table 26 and table 27 of the Data tables (XLXS 611KB)This link will download a file.

SMSF asset allocation

At 30 June 2020:

  • SMSFs held 24% of their assets in indirect investments (trusts and managed investments)
  • SMSFs held 47% of their assets in either Australian listed shares or cash and term deposits
  • 75% of all SMSF assets are held in one of the following five investments: Australian listed shares, cash and term deposits, unlisted trusts, non-residential real property and LRBA assets.

As an SMSF’s total assets increased, the proportion of assets held in cash and term deposits and 'other assets' tended to fall significantly while the proportion of assets held in trusts, LRBAs and non-residential property tended to increase.

Graph 8: SMSF asset allocation, 30 June 2020

Doughnut graph showing the SMSF asset allocation at 30 June 2020 from data table 28. At 30 June 2020 26.4% of SMSF assets were listed shares, 20.7% were cash and term deposits, 5.6% were other managed investments, 11.9% were unlisted trusts, 6.0% were listed trusts, 5.2% were residential real property, 9.5% were non-residential real property, 6.8% were limited recourse borrowing arrangements, and 8.0% were all other assets.

SMSFs in retirement phase had very similar asset allocations to SMSFs in accumulation phase. The only noticeable differences were that SMSFs in retirement phase tended to favour listed shares, while accumulation phase funds held a greater proportion in LRBAs.

Funds in retirement phase held 64% of total SMSF assets. This reflects a small increase, up one percentage point from 2018–19 but down two percentage points over the five years from 2015–16.

See table 28, table 29 and table 30 of the Data tables (XLXS 611KB)This link will download a file.

Diversification

Generally, smaller SMSFs have less investment diversification than larger SMSFs. At 30 June 2020:

  • cash and term deposits were the sole asset held by 6% of SMSFs
  • 8% of SMSFs held all their investments in one asset class, consistent with 2018–19 and down from 11% in 2015–16
  • 40% of SMSFs with assets $50,000 or less held all their assets in one asset class, compared to less than 16% of SMSFs with assets over $500,000
  • 40% of SMSFs held 50% or more of their assets in either cash and term deposits or listed shares

See table 31, table 32, table 33 and table 34 of the Data tables (XLXS 611KB)This link will download a file.

Property investment

The growth in the value of property held by SMSFs is attributed to both new investment and the rising value of Australian real property. SMSFs invest in real property both directly and through LRBAs:

  • Total SMSF investment in real property has grown to $157.2 billion in 2019-20, up from $154.3 billion in 2018–19 and $118.2 billion in 2015–16.
  • Direct investment in non-residential real property grew by 8% from $65.2 billion in 2015–16 to $70.8 billion in 2019–20. Investment in 2018–19 was $69.4 billion.
  • Residential property investment has risen over the past five years, increasing by 35% from $28.3 billion in 2015–16 to $38.3 billion in 2019–20. Investment in 2018–19 was $37.0 billion.
  • Overall SMSF investment in residential real property, both directly and through LRBAs, was $64.4 billion in 2019–20, representing 0.9% of the total Australian residential property market of $7,138.2 billionFootnote9.
  • In 2019–20, residential property investment was highest in the $200,000 to $2 million range, where 6% of SMSF assets are invested in this asset type.
  • In contrast, investment in non-residential real property increased as fund size grew, peaking at 13% of assets in the over $20 million to $50 million range, before dropping to 10% for funds with assets exceeding $50 million.

Graph 9: SMSF investment in real property, 2015–16 to 2019–20

Bar graph showing SMSF investment in real property from the 2016 financial year to the 2020 financial year from data table 28. In the 2016 financial year $65.2 billion was invested in non-residential real property, $11.8 billion was invested in non-residential real property under a LRBA, $28.3 billion was invested in residential real property, and $12.9 billion was invested in residential real property under a LRBA. In the 2017 financial year $65.5 billion was invested in non-residential real property, $18.4 billion was invested in non-residential real property under a LRBA, $34.1 billion was invested in residential real property, and $20.6 billion was invested in residential real property under a LRBA. In the 2018 financial year $66.2 billion was invested in non-residential real property, $20.3 billion was invested in non-residential real property under a LRBA, $35.8 billion was invested in residential real property, and $23.6 billion was invested in residential real property under a LRBA. In the 2019 financial year $69.4 billion was invested in non-residential real property, $22.1 billion was invested in non-residential real property under a LRBA, $37.0 billion was invested in residential real property, and $25.8 billion was invested in residential real property under a LRBA. In the 2020 financial year $70.8 billion was invested in non-residential real property, $22.0 billion was invested in non-residential real property under a LRBA, $38.3 billion was invested in residential real property, and $26.2 billion was invested in residential real property under a LRBA.

See table 28 of the Data tables (XLXS 611KB)This link will download a file.

SMSF borrowings

At 30 June 2020:

  • 12% of SMSFs held total borrowings of $23.8 billion and equating to 3% of the total value of SMSF assets
  • the average value of total borrowings was $340,000, down from $353,000 in 2018–19, and $378,000 in 2015–16
  • the median value of total borrowings was $258,000, down from $264,000 in both 2018–19 and $270,000 in 2015–16
  • 95% of the total value of borrowings reported by SMSFs was for LRBA assets. The average value of borrowings for LRBA purposes was $345,000, down from $360,000 in 2018–19.

Over the five years to 2019–20, on average 91% of SMSFs with borrowings were in accumulation phase, while 9% were in retirement phase.

See table 28 of the Data tables (XLXS 611KB)This link will download a file.

Limited recourse borrowing arrangement (LRBA) assets

In 2019–20:

  • the number of SMSFs reporting LRBAs was 11.3%, down from 11.6% in 2018–19 and 7.4% in 2015–16
  • SMSFs reported borrowings for LRBA purposes of $17.6 billion
  • LRBAs made up 6.8% of the total value of all SMSF assets, consistent with 2018–19 and up from 4.5% in 2015–16
  • assets owned through LRBAs had grown to $50.3 billion, up from $50.0 billion 2018–19 and $26.5 billion in 2015–16
  • of the $50.3 billion of assets held under LRBAs, 96% ($48.2 billion) is related to real property. This was split between residential ($26.2 billion or 52%) and non-residential real property ($22.1 billion or 44%).

A new label was introduced in the 2020 SMSF annual return to record the number of real properties that an SMSF holds under an LRBA arrangement. 84% of SMSFs reported holding one property, 9% reported holding two properties and 3% reported holding three or more. The remainder (5%) reported holding no properties.

Graph 10: Total LRBA assets and proportion of SMSFs reporting LRBAs, 2015–16 to 2019–20

Bar graph showing total LRBA assets and the proportion of SMSFs reporting LRBAs from the 2016 financial year to the 2020 financial year from data table 28. In the 2016 financial year total LRBA assets were $26.5 billion and 7.4% of SMSFs reported an LRBA. In the 2017 financial year total LRBA assets were $40.9 billion and 9.6%of SMSFs reported an LRBA. In the 2018 financial year total LRBA assets were $45.9 billion and 10.8% of SMSFs reported an LRBA. In the 2019 financial year total LRBA assets were $50.0 billion and 11.6%of SMSFs reported an LRBA. In the 2020 financial year total LRBA assets were $50.3 billion and 11.3% of SMSFs reported an LRBA.

See table 28 and table 29 of the Data tables (XLXS 611KB)This link will download a file.

Footnote 9

 

 

Return to footnote 9 referrer

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