SMSF Association welcomes performance calculation changes but urges caution

Adjustments made by the Australian Tax Office (ATO) to align its self-managed superannuation fund (SMSF) performance calculations more closely with methodology used by the Australian Prudential Regulation Authority (APRA) to calculate returns for APRA-regulated funds, has been welcomed by the SMSF Association.

Previously, the average value of assets was used and the calculations were based on net of contributions tax, which has been changed to contributions gross of tax.

The changes were confirmed in the ATO’s 2019-20 SMSF statistical overview report last week, recommended by the University of Adelaide’s International Centre for Financial Services (ICFS).

CEO John Maroney said that the ATO’s calculation processes to calculate median investment returns for the sector “underestimates” the true performance of SMSFs and that the changes ensure a “level playing field”.

“However, it’s critical to note that the ICFS’s research estimated these changes, for the period of the review, would have only accounted for between 25 per cent and 50 per cent of the performance gap,” he said.

“Given the way the data is collated and the different data inputs (the ATO uses information from SMSF annual returns while APRA uses information from fund financial statements), the ATO’s adjusted median return calculations are still likely to generate materially lower performance estimates relative to APRA-regulated funds (all else being equal).

“For this reason, while it may be appropriate to use the ATO’s ‘median’ investment return figures to compare the performance of the SMSF sector relative to other years, they should not be used to compare the performance of the SMSF sector with other superannuation sectors,” Mr Maroney explained.

Neil Griffiths

Neil is the Deputy Editor of the wealth titles, including ifa and InvestorDaily.

Neil is also the host of the ifa show podcast.