SMC reopens debate on compulsory SMSF minimum balances

Mike Taylor

Managing Editor and Publisher

13 July 2026

Industry superannuation funds lobby group, the Super Members Council (SMC) has reopened the debate about whether the Government should impose a minimum balance requirement for the establishment of a self-managed superannuation fund (SMSF).

In a supplementary submission to the Treasury’s recently-closed consultation around enhancing superannuation member protections, the SMC has rolled out research warning that “consumer warning bells” are sounding with respect to the number of younger, low-balance members being lured towards SMSFs.

The SMC’s supplementary submission said recent establishments data shows flows into SMSFs have accelerated alongside platform switching in recent years.

“Data from five large profit-to-member funds with the highest outward rollover volumes that included 25,000 members transferring to SMSFs in 2024–25 shows approximately 61% of these more recent switchers into SMSFs had super balances below $100,000, and growth was strongest among younger cohorts,” it said.

“These trends indicate that SMSF establishment is now increasingly occurring at super balance levels well below those traditionally associated with cost-effective SMSF operation – noting the costs of operating an SMSF are typically much higher for members than if they were in a high-performing, low-fee regulated super fund.

“Similar patterns emerge for SMSF transfers. In 2024–25, 61% had super balances under $100,000 and 80% had under $200,000. Growth was strongest among the lowest balances (19% for those under $100,000). Nearly half of these more recent SMSF switchers were aged under 45, and total SMSF switching grew by 21% year-on-year, with the 30–45 age group experiencing the highest growth at 31%,” it said.

The submission then claimed that low balance younger switchers were headed into an adverse cost and performance equation.

“The data shows that most of these members more recently switching to SMSFs had super balances well below the level needed to achieve investment returns comparable to profit-to-member funds. Over 60% of SMSF switchers in both 2023–24 and 2024–25 had balances below $100,000, with an average rollover of just under $30,000 for that cohort,” it said.

“Australians with super balances under $100,000 face average total SMSF expenses of nearly 12% a year, versus costs of under 0.5% in profit-to-member funds.

“Over the past ten years, SMSFs with $100,000 or less delivered average annual investment returns of -9.5%, compared to +7.0% for profit-to-member funds — a performance gap of over 16 percentage points.

“For members with modest super balances, this combination of much lower investment returns and higher fees can significantly erode a member’s super and retirement financial outlook – compared to being in high-return, low-fee, actively regulated super fund,” the SMC claimed

“In total, SMC estimates that these members who fully rolled over to SMSFs and platform funds in 2024–25 face $163 million in extra fees and costs each year: $139 million of those higher costs for members in SMSFs and $24 million for members in platform products. With most switchers aged 30 to 60, higher costs and lower returns come at a critical stage of wealth accumulation. Higher fees and costs every year can compound to dramatically erode the amount of super a member will have by retirement.”

The submission then pointed to what it called a “clear regulatory asymmetry between the oversight applied to funds regulated by the Australian Prudential Regulation Authority (APRA) and those applying to SMSFs.

“While APRA-regulated funds are subject to performance testing, fee disclosure standards, and trustee oversight duties on advice fee deductions, no equivalent consumer safeguards or regulator oversight apply at the point of SMSF establishment or rollover. This yawning consumer safety gap leaves 1 million Australians in SMSFs exposed to major risks of underperformance, balance erosion, and outsized costs,” it said.

“The result is a form of regulatory arbitrage, where members can be moved into significantly higher-cost and lower-performing structures without the crucial performance and consumer safety protections that apply in the mainstream super system. The data evidence in this attachment strongly supports the reinstatement of clear minimum balance requirements for SMSFs – to give consumers a clear, consistent indicator of when SMSF structures are unlikely to be in a member’s best financial interests.

“Such a minimum balance requirement would complement the proposed rollout warnings framework and help address the structural consumer protection gaps identified in SMC’s primary submission.”