32 Australian SMSFs are worth $100 million+

The wealth of Australia’s leading self-managed super funds (SMSFs) continues to grow. There were 32 funds worth more than $100 million in 2020, up from 27 in 2019, new documents reveal.

The Australian Taxation Office (ATO) has released information on the 100 largest SMSFs in financial years 2019-20 in response to a Crikey Freedom of information request. The data reveals how Australia’s wealthiest people are benefiting from favorable retirement tax breaks.

Australia’s largest SMSF had $401m in FY2020 compared to $544m the previous year – each fund is identified only by its position in the top 100, meaning the parent fund may not be the same than the previous year. The next two largest had $371 million and $273 million in 2020, respectively. The smallest had $53 million, down from $52 million a year earlier.

Even despite a significant decline in the holdings of the top SMSFs, the total money held in the top 100 SMSFs still grew by $9.67 billion to $9.71 billion during that period.

The addition of five SMSFs with more than $100 million in funding in 2020 matched the increase from the previous year, when the AFR reported that there were 22 funds with $100 million in fiscal year 2018.

Retirement funds like SMSFs pay only a 15% tax rate on earnings. Australians who already draw their pensions from their fund are exempt from tax until they reach a limit of $1.7 million each year. There is no limit to the amount that can be kept in a retirement fund.

Last year, Michael Rice, described as “Australia’s leading actuary”, told the AFR that the government’s 2021 Intergenerational Report showed that tax concessions for retirement contributions and earnings would account for 3% of GDP by 2060.

Limiting superfunds ‘would only affect the wealthiest Australians’

The director of the economic policy program at the Grattan Institute, Brendan Coates, said there was no political justification for the huge amounts of money held in major SMSFs.

“It’s another sign that the retirement system is turning into a taxpayer-funded inheritance scheme,” he said. “We know that by 2060, one in every $3 of retirement benefit will be in the form of a legacy. People are investing hundreds of millions of dollars; there’s no way they’re going to spend that on their retirement.”

The easiest solution would be to limit the total amount people can have in their retirement funds, Coates said, and it would save a significant amount of the federal budget.

“A cap of two to two and a half million would be enough to generate a retirement income of more than $100,000 a year, which is about twice the average full-time earnings,” he said.

“If you have more than two million in super, clearly you have your own house and more. This would only affect the wealthiest Australians.”

Another solution was to tax retirement earnings like income tax, he said.

The ATO said it closely monitors the major SMSFs to ensure compliance.

“The ATO reviews and monitors the top 100 SMSFs to ensure that high-wealth SMSFs have acquired their assets within regulatory frameworks and are properly accessing super-tax concessions,” it said.

“When higher risk arrangements are identified, such as reported violations or arrangements that are not arm’s length, the ATO initiates enforcement action.”

Should the wealthiest in Australia still be able to use this taxpayer-funded benefit? Let us know your thoughts by writing to us at [email protected]. Please include your full name to be considered for publication.. We reserve the right to edit for length and clarity.