Changes in valuation guidelines mean additional evidence required for SMSFs

Updates to the Australian Taxation Office’s (ATO’s) Valuation guidelines for self managed superannuation funds means that some trustees will need to provide additional valuation evidence to their auditor to confirm the value of fund investments, such as property.

It has long been a requirement for SMSFs to prepare their financial statements with fund assets valued at market value.  Historically, SMSF trustees have often obtained ‘kerbside appraisals’ from  local agents stating what they believe the subject property is likely to sell for as evidence for the market value of their fund’s property investments.

However, under the updated ATO valuation guidelines, these kerbside appraisals may no longer provide sufficient evidence.  The guidelines provide a list of relevant factors that may be used to evidence the value of a property.  These include:

  • Independent appraisals from a real estate agent (kerbside)
  • The value of similar properties and recent comparable sales
  • Rates notices (if consistent with valuation evidence)
  • Contract of sale, if the purchase is recent and no events have occurred to the property that may materially impact its value since the purchase.
  • Net income yield of commercial property (not sufficient evidence alone, and only appropriate where the tenant is unrelated). 

Importantly, the ATO have stated that they believe it is not sufficient for valuations to be based only on one item of evidence from this list.  A valuation undertaken by a property valuation service provider such as online services or real estate agents would be acceptable, however they must outline the supportable data – such as a letter of appraisal that outlines the comparable sales that were relied upon. 

As we near the end of the financial year, trustees will be arranging appraisals for fund properties for use in the preparation of the financial statements of their funds for the year ending 30 June 2021.  When obtaining these, the new ATO guidelines should be considered.  If you have queries regarding valuations for your SMSF investments please contact your usual Mazars advisor or one of our Superannuation specialists via the form below or on:

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Author: Frances Hill

 

Published: 12/5/2021

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