The aim of this report is to provide a source of data to assist SMSF trustees and their advisors in their decision making.

Transcription

1 The aim of this report is to provide a source of data to assist SMSF trustees and their advisors in their decision making.

2 CONTENTS PAGE Summary of Findings 3 Background 3 Meet the Auditors 4 Comments on Survey Findings 5 Contraventions 5 Fund Size 6 Membership 6 Asset Mix 7 Insurance 8 Administration Costs 8 Appendix TABLE 1. Summary of data 9 2

3 SURVEY BACKGROUND Summary of Findings Almost half of the funds in the survey were either paying a pension to a retired member or a Transition to Retirement Income Stream to a member who had attained preservation age. Reportable contraventions continued to fall although this year, however we saw an increase in the number of breaches arising from SMSFs borrowing. Background Partners Superannuation Services (PSS) is part of the Partners Wealth Group (PWG). PWG is a national organisation that provides financial and legal services to accountants and their clients. The annual survey conducted is based on a selection of 600 funds drawn from the pool of funds audited by PSS in the preceding year. Some of the funds may have been included in a prior year's sample group. PSS has two ASIC registered auditors, Martin Murden and Tiffany Yang. The aim of the survey is to provide a source of data to assist SMSF trustees and their advisors in their decision making. A table showing comparisons of the survey for the seven years to 2014 is included in the appendix. For more information about Martin and Tiffany, and the services Partners Wealth Group provides, visit 3

4 MEET OUR AUDITORS Martin Murden Director, Audit & Consulting, Partners Superannuation Services Martin is a founding partner of Partners Wealth Group and is one of Australia s leading authorities on Self-Managed Superannuation Funds (SMSFs) with more than 40 years experience in Financial Services. He is a Fellow of CPA Australia and also a Fellow of the Australian & New Zealand Institute of Insurance and Finance. Martin is accredited as both a Specialist Superannuation Auditor and a Specialist Superannuation Adviser by SMSF Professional Association of Australia (SPAA). Tiffany Yang Senior Auditor, Partners Superannuation Services Tiffany joined Partners Wealth Group in 2007 and has been a key person looking after SMSF Audits. She is a Certified Practising Accountant that specialises in SMSF Audits. Tiffany is an accredited SMSF Auditor and a Specialist Superannuation Adviser by the Self-Managed Superannuation Funds Professionals Association of Australia (SPAA). Martin Murden Director Audit & Consulting, PSS E mmurden@partnerswealthgroup.com.au T Tiffany Yang Senior Auditor, Partners Superannuation Services E tyang@partnerswealthgroup.com.au T

5 SURVEY FINDINGS Comments on Survey Findings Contraventions The total number of funds requiring a contravention report to be lodged with the ATO fell slightly from 5.3% to 5% of the survey group. The longer term average for the 7 year period of the survey is 6.3%. Whilst the continued decline is evidence trustees are trying to comply with the requirements of SIS, it is noticeable the ATO's figures show only approximately 2.2% of all funds had a contravention report to be lodged in the 2013/14 year. The two most common contraventions for each year the survey has been in operation have been in house assets and loans to members. This year has seen some change. These two breaches have fallen to 20% and 23.3% respectively. The averages since the survey commenced have been 36% and 32%. This year has seen a significant increase in breaches arising from borrowings by SMSFs, an increase from 12.5% to 23.3% of the total funds which have been issued with contravention reports. Only one of the breaches in this category related to a fund acquiring property via a LRBA. There were only two other breaches that occurred more than once. Both occurred twice. They were failure to provide the auditor with the information requested within the prescribed timeframe and failing to comply with the member trustee rules. *Other breaches included 2014 Audit Breaches Failure to comply with pension payment requirements Giving a charge over fund assets for personal borrowings Disqualified person acting as trustee Failure to comply with the rules concerning artwork and collectibles 5

6 SURVEY FINDINGS Fund Size The average fund size in this year's sample group was $1.022m, a sizeable increase on the previous group which was $823K. The average fund size for the seven years of the survey was $784K. A noticeable change with this year's group of funds was in numbers at the extremes. 191 funds or almost 32% had assets in excess of $1m including 13 with assets greater than $5m. The largest fund just topped the $10m figure. Over the survey period funds with $1m or more in assets have averaged 24% At the other end of scale, 29 funds or 5% had assets of less than $100k and a further 46 funds (8% had assets in the $ K range. The averages over the last 7 years have been 11% and 13% respectively. Whilst some of the smaller of these were first year funds with rollovers to come from other funds, it was evident that others had been in operation for some years and they were only slowly increasing in size. Membership Over the course of the last 7 years, the number of funds with 2 members has stayed within a narrow band of 68-72% with the average being 70%. This year's survey came in with 70% of funds having 2 members. Sole member funds made up 24% of the survey group. The longer term average is 22% and this year was at the upper end of the 18-24% range of the last 7 years. Three and four member funds were at their lowest for the survey period with 6%. The average has been 8% and the highest 10% in 2008, 2009 and Whilst the most common fund size remains at two, being typically a husband and wife or a couple in a de facto relationship, the one member funds are of interest. Whilst some of these have been started as a single member fund, others have become so due to either the death of a member or divorce. Three and four member funds usually comprise parents and one or more of their children. 6

7 SURVEY FINDINGS Asset Mix SHARES/LISTED TRUSTs 39.6% of investments were in listed shares and trusts which was consistent with the seven year average of 39%. The percentage held stayed within a narrow band over the course of the survey with a constantly changing pool of funds. DIRECT PROPERTY Direct property investment was 22% of total investments. This has fluctuated over the seven years from 13.4% in 2008 to a high of 22.1%. The average has been 19%. What is interesting to note is that of the 165 funds in the survey group that directly held property, the average fund value was $1.689m and that almost 48% of this was invested in direct property. CASH & FIXED INTEREST Cash and fixed interest investments were 13.6% and 14.8% respectively. Both have an average of 14% over the seven years the survey has been conducted. Last year's survey group recorded 19.6% in fixed interest investments. With subdued interest rates, a lower allocation could be expected as trustees look elsewhere for higher returns. One reason for a consistently high allocation to cash is the percentages are calculated at the end of the financial year and SMSFs can be expected to have received additional contributions in the month of June which are yet to be invested by the end of the month. MANAGED FUNDS This year's survey group recorded the lowest allocation (4.4%) to managed funds for the seven year period. The lowest previously recorded was 5.3% and the average over the period of the survey has been 6%. Other investments at 5.6% were also below the longer term average of 7%. Other investments include artwork & collectibles, in house assets, unlisted investments and associated unit trusts. ASSET DIVERSIFICATION OVER 7 YEAR PERIOD 7

8 Annual Administration Fees SURVEY FINDINGS Insurance Only 24.5% or 147 of the funds in the sample group had at least one member with insurance cover. Information about insurances has only been part of the survey for the last six years with an average of 137 funds providing cover. The number for 2014 was a drop on the 2013 figure of 185. The number of funds paying pensions increased over last year; as a result, a lower number of insurance providing funds was expected. The average premium paid per fund was $4,979. The average premium for the survey over the last six years has been $4,082. Insurance cover tends to be for both death and total & permanent disablement, although some members were only insured against death. The TPD definition in all funds was the "any occupation" definition as required by SIS. As the average membership of these funds was exactly two, the average premium per member was a little under $2,500. Administration Costs The combined accounting and audit fees were an average of $3,420 for funds in the sample group. This was above both the longer term average for the survey ($3,049) and the prior year's group ($3,159). This can be partly explained by the increase in the average fund size in the survey group. Larger funds tend to have higher costs. Funds that separated out their audit fee had an average of $762 compared to $638 from the previous year. ADMINISTRATION FEES OVER SURVEY PERIOD $3,400 *Questions about accounting & audit fees and insurance premiums were not asked in the 2008 survey. 8

9 SURVEY APPENDIX TABLE 1. Summary of data 2014 Audit Survey Statistics ATO Contravention Reports Funds Breaches In House Assets Loans to members Borrowings Other Membership member fund member fund or 4 member fund Fund Size > $1m < $100, $100,000 - $200, Average $1,022,105 $823,467 $923,652 $796,641 $729,061 $684,062 $511,806 Asset Diversification Shares/Listed Trusts Property Cash Fixed Interest Managed Funds Other Funds Paying Pensions Accounting & Audit Fees $3,420 $3,159 $3,243 $3,065 $2,922 $2,483 Insurance Premiums Number of Funds Average Premium $4,979 Comments about the figures in the table $4,427 $4,862 $3,817 $2,956 $3,449 Figures are percentages unless otherwise indicated. "Other" for asset diversification includes artwork & collectibles, associated unit trusts and in house assets. Questions about accounting & audit fees and insurance premiums were not asked in the 2008 survey. 9

10 CONTACT US For further information about the PSS Audit Survey, contact Partners Superannuation Services Martin Murden Director Audit & Consulting, PSS E mmurden@partnerswealthgroup.com.au T Tiffany Yang Senior Auditor, Partners Superannuation Services E tyang@partnerswealthgroup.com.au T Partners Wealth Group Partners Retirement Planning & Investment Advisors Partners Aged Care Advice Partners Property Partners Superannuation Tax Services Partners Superannuation Services Partners Wealth Protection Partners Mortgage & Lending Guild Financial Planning Partners 360 Partners Legal Head Office: Level 13, 636 St Kilda Road, Melbourne VIC 3004 T NSW Office: Level 4, 8 Spring Street, Sydney NSW 2000 T QLD Office: Level 3, 164 Grey Street, South Brisbane, QLD 4101 T WA Office: Level 1, 9 Bowman Street, South Perth, WA 6151 T office@partnerswealthgroup.com.au Disclaimer: This publication has been prepared to provide you with general information only. It is not intended to take the place of professional advice and you should not take action on specific issues in reliance on this information. In preparing this information, we did not take into account the investment objectives, financial situation or particular needs of any particular person. Before making an investment decision, you need to consider (with or without the assistance of an adviser) whether this information is appropriate to your needs, objectives and circumstances. Partners Wealth Group does not give any warranty as to the accuracy, reliability or completeness of information. We do not accept any liability for any error or omission in this presentation or for any resulting loss or damage. Past performance is not indicative of future performance. This information is provided for persons in Australia only and is not provided for the use of any person who is in any other country. The Advisors of Partners Retirement Planning & Investment Advisors are Authorised Representatives of Charter Financial