This has already received criticism from the SMSF Association who raised concerns around the quality of the data used in the draft report and stated $1 million was not an appropriate figure for basing decisions on whether to establish an SMSF or not.

SMSF Benchmarks, a company that provides peer-to-peer comparisons for SMSFs, agrees that while fees are a factor, especially for funds under $300,000, there are plenty of large SMSFs that are underperforming the median SMSF return, and plenty of small SMSFs performing strongly.

SMSF Benchmarks chief executive Nick Shugg said the conversation should not be “over-simplified to say that ‘SMSFs under $1m should be shut down’ as has been suggested in some quarters”.

Mr Shugg said there are many SMSF trustees that are disengaged with their fund however, and have no idea how it is performing or what they should to if it consistently under-performing.

“Trustees have an obligation to review their investment strategy, but most just pay lip service to that, to satisfy a ‘compliance hassle’,” he said.

“Many self-directed trustees fall into one approach or another without wanting to face how that approach is going, because they see it as a reflection on them. Some behave more like speculators than investors.”

Trustees, he said, are often unaware of the range of alternative approaches they could be including in the mix, which may lead to better outcomes.

“It is not the role of the ATO, as regulator of SMSFs, to worry about whether trustees are doing a good job of managing their fund for performance — they only have the resources and the mandate to check if trustees are managing their fund for compliance,” he said.

“If [trustees] start to look at how their fund is actually going, they will become more engaged, and open up to discovering other investment approaches, and they’ll be better placed to make good decisions and get better outcomes over time.”