Australia’s system of compulsory superannuation means most workers have substantial retirement savings by midlife, with smart investment decisions and savings discipline the key to unlocking a blue-chip retirement. Most Australians build their retirement wealth within an industry or retail superannuation fund, but others use a self-managed superannuation fund (SMSF) that they set up (in accordance with Australian Tax Office rules). Given the average Australian male between 45 and 49 has just $224,200 in superannuation (as of 2022, according to Deloitte), and the average woman’s balance is just $146,400 for the same age group, many Australians, particularly in midlife, see setting up an SMSF as a better option to boost their retirement savings. These funds are described as “self-managed” because the members make their own decisions about what investments to buy and hold in the fund.

“SMSFs are subject to the same tax concessions as other types of super funds and the same rules when it comes to not being able to access your money until you retire,” says Peter Burgess, CEO of the SMSF Association.

The funds are set up as trusts and require a deed that outlines their governance and names the trustees who are also the legal owners of the assets. Here are seven charts that explain who has SMSFs, what they invest in, and the average size of their balance.

What are SMSFs and how popular are they?

In Australia, there are 610,287 funds boasting self-managed assets under management totalling $878 billion, the latest ATO data shows. The total number of SMSFs in operation has been growing steadily (the number has risen to today’s 610,287 from 580,479 in 2021 and 533,716 in 2015). The graph below shows industry super funds manage the highest amount of superannuation money at $1.2 trillion, followed by the SMSF sector. More people are opting for SMSFs because they can have control and flexibility over their investments, and there are certain investment rules set up for SMSF investors, Burgess says.

“So, for example, you’re not restricted to choose investments from a menu like you typically are in larger funds – you can invest in shares, residential or business property for example,” he says.

Contributions up to $27,500 per year (including compulsory super) may be made per member into SMSFs during a financial year at concessional tax rates of 15 per cent, which is commonly lower than other income tax rates. Women and young people are two demographics driving the rising uptake of SMSFs, says Drew Meredith, a director at private wealth manager Wattle Partners.

“I put this down to greater levels of financial literacy, given the popularity of podcasts and education in the last three years post the pandemic,” says Meredith.

“People are increasingly seeing their super as their own money, not someone else’s, meaning they want to control it. SMSFs are also becoming cheaper and more accessible with technology.”

What type of person has an SMSF?

The tax office’s data shows about 69 per cent of all SMSFs have two members as trustees, as cohabiting or married couples commonly combine funds. Single members represent 24 per cent of all funds and 7 per cent of funds have three to six members. Funds with three to six members may also include children, other family members or unrelated investment partners.

“A self-managed super fund is a fund that has no more than six members. The vast majority have one or two members normally as spouses, so the members are the trustees,” says Burgess.

The highest proportion of average income per SMSF member is between $0 and $20,000, at 22.5 per cent. This reflects the fact that 55.1 per cent of members are 60 or over and are retired or semi-retired. (The median Australian employee earned $65,000 in 2022, the Australian Bureau of Statistics says.) The chart above shows at least 40 per cent of SMSF members earned above the median income even after accounting for the fact that many have relatively low incomes in retirement. In other words, many SMSF members may be asset rich, but income poor because of their advanced age.

“There is a tendency for those with higher levels of wealth to be better engaged with their investments,” says Meredith.

“It tends to be that those with higher asset levels want greater control of their money, or at least transparency over where it is invested. They tend to see it as a real asset, not someone else’s.”

Meredith also says that much SMSF advice is driven by financial advisers, who are unaffordable to many, so it’s natural that those on higher incomes, getting financial advice, might gravitate to them.

“As you get more money, you want more control, it’s also driven by financial advice and SMSFs are more recommended by financial advisers to people with significant assets of $500,000 or more.” he adds.

When do most people start an SMSF?

According to the ATO, the average age of an SMSF member is 61.

“The majority of SMSFs are set up by retirees, so they tend to have more cash as they need it and more income-producing, rather than growth, assets,” says Meredith.

Many people wait until they are nearing retirement, or their super balance has tipped over a certain amount, before starting an SMSF because at that point it becomes more cost- effective to have money in a DIY fund. Meredith says SMSFs in the accumulation phase (before retirement) are often set up by professionals in blue-collar jobs, or by successful small business owners. SMSFs with more than $500,000 should be cheaper to run than paying an industry or retail fund’s fixed fees on an annual basis, says Burgess. For example, paying an industry fund 1 per cent would equal $5000 in fees paid every year on a balance of $500,000, with SMSFs able to be run at a cheaper cost than this per year.

“For individuals with large balances, SMSFs can be typically cheaper than being in a large fund once you go over $500,000,” says Burgess. “But remember you have that additional responsibility as the trustee of your fund, although you might not have the same protections that come with being in a large fund.”

What is an SMSF’s typical balance?

As SMSF members contribute more to their funds over time, their balances increase on top of investment returns via capital growth and dividends. This means older cohorts of investors tend to have accumulated the highest balances, says Meredith. By the time SMSF members reach their mid-70s, they have an average of about $1.4 million. But the median SMSF size – discounting the impact of exceptionally high balances – is $467,187. According to data from SMSF platform provider Class, the average contribution per member in financial 2022 for concessional (or pre-tax) amounts taxed at a lower rate was just over $20,000. The average non-concessional (after-tax) contribution was just over $60,000 per year. This shows many members have significant disposable incomes to invest in their SMSFs.

What do SMSFs invest in?

SMSFs’ largest single investments are listed shares at $260 billion. Data from Class shows the most popular shares to invest in on its platform are Commonwealth Bank, BHP, Woodside Energy and Westpac. Blue chips are common holdings as they’re among Australia’s largest companies and pay good dividends, Meredith explains.

“Retirees need cash and want to see income coming in so the easiest way to do that is to get dividend income coming in and hold cash, as you still have to pay the bills in retirement,” he says.

“An SMSF is like an extra bank account for retirees, and you can get 5 per cent on cash now, so people like to have it more than ever.

“Plus with companies that pay fully franked dividends you get franking credits, so you get a free kick of around an extra 30 per cent [of taxable income benefits] if you’re in retirement or pension phase.”

After listed shares, the next biggest asset class is cash and term deposits totalling $147.4 billion. Then there’s $108.3 billion in unlisted trusts, $81.1 billion in non-residential property, $52.7 billion in listed trusts such as managed investment schemes, $53.2 billion in other managed investments, $44.8 billion in residential property, $14.1 billion in overseas shares, $10.1 billion in debt securities, and $943 million in cryptocurrencies. Residential property is not necessarily more attractive than other investible asset classes because, while it can be bought via an SMSF, it cannot be lived in by the SMSF owner or rented by them or anyone related to them.

“An SMSF can acquire residential property as long as it’s not being acquired from someone related to the fund. Once the property is sold down the track, if it’s owned by the fund it’s taxed at concessional rates of CGT compared to other types of investment vehicles,” Burgess says.

Dozens of other varied asset classes including artwork and overseas property make up the difference to take the total value of SMSF assets to $876.5 billion as at June 30, up from $843.7 billion at the same time in June 2022.

How much do retirees end up with?

According to ATO data for the tax year to June 2021, the average SMSF member balance for those aged between a standard starting retirement age range of 60 to 64 is $911,974 – it is, however, skewed by some exceptionally large SMSF balances. This is far higher than the average (non-SMSF) superannuation balance of $402,838 for men aged between 60 and 64, or $318,203 for women the same age, ATO data for financial year 2021 shows. Meredith says SMSF investors tend to have higher incomes, financial education and literacy, which explains why they accumulate larger balances by retirement age.