n increasingly hot topic discussed by Self-Managed Superannuation Fund (SMSF) auditors each year concerns the valuation requirements for SMSF property.
Let’s explore what the regulations stipulate and how to ensure compliance.
According to the Australian Taxation Office (ATO), all SMSF investments must be valued at market value as of 30 June each year. This requirement needs accurate valuations which are essential for:
- Properly valuing member balances
- Meeting minimum pension drawdown requirements and retaining tax concessions
- Correctly assessing a member’s eligibility to make contributions
- Accurately calculating capital gains or losses upon asset disposal
What does the ATO say?
The ATO website states the following:
“Each year trustees must provide objective and supportable evidence in accordance with the requirements under our SMSF valuation guidelines to their auditor”.
What are my options?
- Sworn valuation from a qualified and independent valuer.
- Real estate agent valuation – with comparable sales listed in the valuation.
- Online valuation – these will normally indicate whether the reliability is high, medium or low. The valuation needs to have a high reliability and include comparable sales.
- Valuation from trustees – with evidence included such as recent comparable sales.
- Independant SMSF Property Valuation Report – property analysis, comparable sales plus a secondary method of valuation. This is what we offer. Our services are the latest and easiest option for investors and are auditor-approved.
How can I find out what will satisfy the auditor?
The auditor’s role is not to value assets but to verify that the market values recorded in the SMSF financials are based on sufficient, appropriate, and independent evidence. Moreover, they will evaluate the quantity, reliability, relevance, and source of the provided evidence. Sound like a lot? It is, but rest assured, we have the winning formula.
For instance, if a property holds significant value, an auditor might determine that a basic appraisal letter from the real estate agent responsible for leasing the property is insufficient. Instead, they may request a detailed valuation report from an independent valuer.
It is important to note that auditors cannot accept evidence in editable formats, such as an email forwarded by the trustees from a real estate agent confirming the property’s market value or information in Word or Excel formats.
Conclusion
The ATO are ramping up their monitoring of SMSFs in 2024 and beyond. Trustees will need to provide some sort of documentation supporting their value estimate of their property each year. What it really comes down to is, do you have enough evidence to support your claim? And will your evidence hold up against ATO scrutiny?
If you don’t have the time to research and prepare documented reports or the will to spend unnecessary amounts of money on a sworn valuation, then consider ordering a residential property valuation report or commercial property valuation report from Superfund Property Valuations. Our reports are 100% ATO compliant and priced competitively as our mission is to minimise the financial and administrative burden that is now placed upon investors.
