Jul, 2024

The ATO valuation guidance was last updated in November 2022 (ATO Link).  The guidance requires the trustee to determine the market value of the assets in the fund at 30 June each year, for financial statement purposes.  This value is to be determined based on a market value assessment using objective and supportable data.

The guidance does not require a valuation by an expert to be undertaken for all assets each year. Unless the property has been recently purchased, the ATO Guidance provides that the trustee should consider a variety of recent sources to substantiate the market value of the property. A valuation can be undertaken by anyone with the precursor that it must be based on objective and supportable data.

An expert valuation of a property asset is prudent where the trustee believes:

• the valuation is materially inaccurate; or
• a significant event has occurred since it was last valued; or
• when the property value represents a significant proportion of the fund assets; or
• the nature of the property asset indicates that the asset valuation may be complex or difficult to determine.

The inclusion of comparable data within an expert valuation or appraisal report is required to support the ATO guidance.  It also assists the trustees and the SMSF Registered Auditor in evidencing the basis of the value as determined within the expert report.

When valuing real property, relevant factors and considerations may include:

• The value of similar properties and recent comparable sales.
• The amount that was paid for the property in an arm’s length market – provided the purchase was recent and no events have materially affected its value subsequent to purchase.
• Independent appraisal from a real estate agent (kerbside) or a market data report from an online service – where the valuation includes comparable sales of properties similar in nature to the property held by the SMSF or other relevant comparable data.
• Whether the property has undergone improvements since it was last valued.
• The rates notice (provided it is consistent with other valuation evidence).
• For commercial properties, net rental income yields, noting that rental income yield is not sufficient evidence on its own and, is only appropriate where a tenant is unrelated

It is a SMSF trustee responsibility to document the basis of the fund property valuation to support the SMSF trustee assessment of the market value at year end. This responsibility is clearly articulated within the ATO guidance (ATO Link).   Where a SMSF trustee provides inaccurate or insufficient valuation evidence this may result in a breach of  R.8.02B of SISR, adverse tax consequences and penalties or administrative actions by the ATO.

The SMSF Registered Auditor responsibility is to review the evidence to support the valuation of the fund property asset in conducting the audit of the financial statements. The valuation assertion for property is usually a key audit focus.  The scope of the audit procedures considers whether the trustees have:

• Valued assets at market value in preparation of the annual financial statements of the SMSF; and
• That the valuation is based on objective and supportable data.

This responsibility is clearly articulated within the ATO guidance (ATO Link).

Where the valuation evidence provided is not sufficient to support the property value at year end the SMSF Registered Auditor may be required to qualified the audit opinion and report this as a contravention to the ATO via an Auditor Contravention Report.

Trustees should seek advice from appropriately qualified property valuers or real estate professionals, and / or gather other objective and supportable data to ensure property values support the ATO guidance. Regular review of property values by the trustee are required at least annually.  These are essential to evidence the trustee consideration of the property valuation information gathered and that this supports the current market value of the property for the relevant financial year.  Evolv partners with certain desktop property valuation providers to support trustees to meet the ATO guidance.

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