The wealth of Australia’s top 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.
Information about the top 100 largest SMSFs in the 2019-20 financial years has been released by the Australian Taxation Office (ATO) in response to a Crikey freedom of information request. The data reveals how Australia’s richest people are taking advantage of the favourable superannuation tax concessions.
Australia’s largest SMSF had $401 million in the 2020 financial year compared with $544 million the year before — each fund is identified only by its position in the top 100, meaning that the top fund may not be the same one as the year before. The next two largest had $371 million and $273 million in 2020, respectively. The smallest had $53 million, up from $52 million the year before.
Even despite a significant decrease in the top SMSFs’ holdings, the total money held in the top 100 SMSFs still grew by $9.67 billion to $9.71 billion over that period.
The addition of five SMSFs with more than $100 million in funds in 2020 matched the increase of the year before, when the AFR reported that there were 22 funds with $100 million in the 2018 financial year.
Superannuation funds such as SMSFs pay just a 15% tax rate on earnings. Australians already drawing their pensions from their fund are exempt from tax until they hit a limit of $1.7 million each year. There is no limit to the amount that can be held in a superannuation fund.
Last year Michael Rice, described as “Australia’s top actuary”, told the AFR that the government’s 2021 Intergenerational Report showed tax concessions for superannuation contributions and earnings would account for 3% of GDP by 2060.
Capping super funds would ‘only hit wealthiest Australians’
The Grattan Institute’s economy policy program director Brendan Coates said there was no policy justification for the enormous amounts of money held in the top SMSFs.
“It’s another sign that the superannuation system is becoming a taxpayer-funded inheritance scheme,” he said. “We know that by 2060, one in every $3 of benefit of superannuation will be in the form of a bequest. People are putting in hundreds of millions of dollars — there’s no way that they’ll spend that in their retirement.”
The easiest solution would be capping the total amount that individuals can have in their superannuation funds, Coates said, and it would save a significant amount of the federal budget.
“Capping it at two or 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 median full-time earnings,” he said.
“If you’ve got more than two million in super, you’ve clearly got your own home and more. This would only hit the wealthiest Australians.”
Another solution was to tax superannuation earnings like income tax, he said.
The ATO said it keeps a close eye on the top SMSFs to ensure compliance.
“The ATO analyses and monitors the top 100 SMSFs to provide assurance that high-wealth SMSFs have acquired their assets within the regulatory frameworks and are appropriately accessing super tax concessions,” it said.
“When higher risk arrangements such as reported contraventions or non-arm’s length arrangements are identified, compliance action is initiated by the ATO.”
Should Australia’s wealthiest be able to keep using this taxpayer-funded perk? Let us know your thoughts by writing to letters@crikey.com.au. Please include your full name to be considered for publication. We reserve the right to edit for length and clarity.
Should Australia’s wealthiest be able to keep using this taxpayer-funded perk?
Do you really expect anyone to make the “yes” case?
There is no need to ‘make a case’ because, privilege.
The antiquity of an abuse is no justification for its continuation but usually prevails, just because.
I do expect Labor to be making some moves here in the near future. Expect the screaming to start from the usual suspects and lots of conflating the effects to create sob stories about hard working ordinary people having their hard earned retirements trashed.
Super concessions should support an adequate retirement, not keep you in the lifestyle to which you and your children are accustomed. Most people will retire with at best $300,000 in super and those with a more middle class career will have between $600 to $1.2 mill for a couple, depending on work history. Even at the lower end that will exclude them from the pension, while supplying them with an income about 20% higher than the pension with no capital loss occurring. That is, the money won’t run out if they keep getting by on $30-32,000 a year
$1.6 mill, at 5% average earning, will yield a tax free income of $90.000 a year while preserving the capital. This is more than double the median wage. Few people will get even to this $1.6 mill level, let alone to multiple or tens of millions. Every taxpayer is contributing to the tax concessions enjoyed by super. For those on wealthy incomes those concessions can save them 22% or more from their taxes each year, within the contribution cap. It is inequitable and inefficient to have such a large proportion of this concession flowing to so few, who don’t need it anyway. Note that even without the concessions, slabs of income from these multimillion funds will be via share dividends that come to them tax free.
This aspect of super is the sort of rort the Coalition exists to protect. Labor should move quickly and hard so the electorate has plenty of time to at least absorb that the scare campaigns are baseless. Their super faces no threat. They may even realise they have been done a favour in there being some dollars freed up that might be spent on things they use or need, not an extension to someone’s holiday house(s) or the business class fares for the annual trip to the European summer.
I earn a figure in the mid size figure range. I do not intend to live in a caravan in retirement. I also intend to live at least 30 years post retirement. Why should I be forced to live in penury to make my super last till I die? I have paid tax at the top marginal rate almost my entire working life, and I do not appear to have received much if anything in the way of a dividend in my compulsory investment in the Federal Government. Time for a bit to flow back to me I think.
Hark, the first day of Spring and on the wind the forlorn, dreary cry of the Too Often Spotted Self-Entitled Whiner.
Unfortunately it is far from a threatened species and quickly reaches plague proportions if not regularly culled.
The usual control measures, middle class welfare & tax cut bribes only increases the numbers and demands.
Love it, thanks for the giggle…
Still better than hearing the forlorn, dreary cry of the Too Often Spotted Expect Everything-To-Be-Handed-To-Me Entitled Whiner.
Frequently seen working in the Public Service because it’s the least they can do, in every way possible.
Bye, bye little, little man.
Right… so you never made use of any of the government-funded infrastructure or services? Don’t drive on roads, live off grid, didn’t attend school and never needed medical services or medication. Also, never benefited from any tax, business and otherlegislation, tax breaks, write offs, home loan schemes etc… Cool.
Right… so you never made use of any of the government-funded infrastructure or services? Don’t drive on roads, live off grid, didn’t attend school and never needed medical services or medication etc… Cool.
Howard and Costello created an even more generous super regime which was wound back slightly. Why other country has a tax regime where a 60 yo who benefited from free uni and a property windfall pays little tax including franked credit refunds while a 30yo with a family and mortgage struggles. Scotty and Joshie made it even worse.
And it was those “…who benefited from free uni and a property windfall…” who switched off the escalator on which they’d cruised upwards and put it place the HECS greased pole, whipping, buckling & bending with every new fee, charge, impost & overpriced tertiary course they required.
Wish I could remember which bunch of class traitors (hi there, Hawkie & Kelty!) did this to their True Believers and committed these foul betrayals.
Jack ‘ArtlessDodger’ Dawkins springs to mind re HECS and who could forget the World’s Greatest Treasurer who gifted us “the recession we had to have”, refused to abolish negative gearing when it became a scam to make up for the FBT, and ended his term with 19% mortgages for the battler trying to buy a ‘home'(quaint concept) rather yet another investment property to rent.
And it was those “…who benefited from free uni and a property windfall…” who switched off the escalator on which they’d cruised upwards and put it place the HECS greased pole, whipping, buckling & bending with every new fee, charge, impost & overpriced tertiary course they required.
Wish I could remember which ‘Labor’ government (hi there, Hawkie & Kelty!) did this to their True Believers and committed these foul betrayals.
Jack ‘ArtlessDodger’ Dawkins springs to mind re HECS and who could forget the World’s Greatest Treasurer who gifted us “the recession we had to have”, refused to abolish negative gearing when it became a scam to make up for the FBT, and ended his term with 19% mortgages for the battler trying to buy a ‘home'(quaint concept) rather yet another investment property to rent.
The modbot seems to have a new list of forbidden words added.
Possibly added after the Dauphin’s tanty.
Even set the limit at 5 or 10 mil, anything is better than the current uncapped setup
Its an unfortunate truth, that regardless of any “safeguards” or “limits” that Governments put on, Rich people will always be able to find a way to exploit it.
Anyone can set up an SMSF and use it for wealth creation for their retirement, not just “rich people”. The truth is, most people are too lazy and too ignorant to learn what to do.
You need an absoluite minimum of $100,000 to make setting up an SMSF worthwhile (compliance costs etc)…..
So no, it is not designed for even average income earners.
$200K actually IMO but it really depends on the actual costs incurred which boils down to how complicated the investments of the fund are and who administers the fund. Setup costs can be quite reasonable. $200K is not a large amount in a superannuation account these days.
It can quite easily be accessed for average income earners who wish to create wealth and have a level of greater control over their super.
The truth is, an SMSF is insanely expensive if you’re in the bottom 95% of income-earners. But I simply love your generalisations!
My “generalizations” come from a basis of actual experience when it comes to investing and superannuation in particular.
How much of your yuan/renminbi do you have invested in those ghost cities that litter the landscape?
Some of which, never inhabited, are now being demolished while others are being bulldozed before even being finished.
Given that you wouldn’t know a “ghost city” or whether or not they actually “litter the landscape” (never having actually been to China) the question is idiotic and well off topic.
Perhaps most People don’t earn enough to.have left over cash sitting idly by.