SMSF wind-ups spike: ATO

The number of self-managed superannuation fund (SMSF) wind-ups shot up in the last 12-24 months, according to Australian Tax Office data.

Latest ATO data reveals in 2014 the number of SMSF wind-ups was 12,654 and hovered around that point, reaching 13,470 in 2017.

However, in 2018 the number of wind-ups increased significantly to 20,430.

At the same time, establishments have also been decreasing over time. In 2014 there was 33,358 SMSFs established, a number that gradually declined over the years to 2017 which saw 30,517 establishments.

Again, establishments took a dive in 2018 with only 25,457 recorded.

However, the total number of SMSF members has remained consistent, hovering around one million for the last five years - reaching a high of 1,102,730 last year.

Liam Shorte, director and SMSF specialist at Verante Financial Planning, said these numbers come after an ATO crackdown on non-reporting SMSFs.

He further explained the increase in SMSF wind-ups could simply be the passage of time.

"The first cohort of original SMSF trustees is now reaching age 80-90 and their balances may be getting low or they have lost interest in running a SMSF.  It is good to see they are electing to wind-up their funds if they're not suitable any longer or if there's no family support to continue," he said.

He also noted the decrease coincides with many SMSF accountants deciding not to proceed with a limited licence so trustees would have been carefully considering whether to continue with another adviser or accountant.

And establishments may have further to fall, with Shorte predicting a Labor Government to impact the sector.

"I expect the level of wind-ups to spike next year if Labor bring in their proposed changes to franking credits and contribution rules but then it will settle back to the current level of 20,000 per year. I do not see wind-ups returning to the lower level," he said.

However, he added that a majority of new SMSFs being set up are by those aged in their 40s and 50s which means that franking credits are not such an issue for them.

Shorte sees this as a reason to be positive: "The sector will remain a strong viable alternative for those who want to manage their own funds and maximise flexibility and choice or if they just don't trust big funds."

The ATO collects data on SMSF wind-ups initiated by either trustees or as a result of ATO compliance and cleansing activity.

Read more: ATOAustralian Tax OfficeLabor GovernmentLiam ShorteVerante Financial Planning
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