In April 2025, the ATO released updated SMSF Valuation Guidance. This now states that the trustee must determine the market value of the assets held by the fund at 30 June each year, for financial statement purposes.
The ATO defines market value as: “an amount that would be agreed to by a willing buyer and seller within an arm’s length transaction, with the value evidenced, using objective and supportable data”.
The SMSF auditor’s role is to consider the evidence provided by the trustee and whether this is sufficient and appropriate to support the recorded market value.
The ATO valuation guidance is applicable for all assets held by a fund including widely held unlisted securities. Often these unlisted securities have no ready market. This usually means that there is no active secondary market for the security. Where there is no ready market, this is not a “good” excuse for a trustee to not determine a market value for the fund asset each financial year.
A trustee is required to support the market value at 30 June each year and will need to:
► consider the available evidence
► determine what information is the most relevant to support a market value
► provide adequate documentation to the auditor
In gathering evidence to support the market value of unlisted widely held investments, the trustee should consider:
► the nature of the investment, and
► the underlying operations and assets of the unlisted investment.
Considerations for gathering evidence include:
Is the entity a property investment vehicle?
Where the entity is a property investment vehicle, (i.e. is managing property), share of net tangible assets at market value may be the most relevant information.
Is there a Secondary market?
The secondary market may be not actively traded, but this may be the most relevant observable market data. Consider if there are recent share trades and available price at or around year end. Where it is a company, registry services may not always hold this information. Liaison with the company directly may be required to obtain a recent share price at or around year end. Often there is no secondary market and other information that may support a market value at year end should be obtained. Again, this information varies based on the nature of the investment. Questions to consider are:
► Does the company provide shareholder updates?
Shareholder updates often provide relevant information that may support evidence of market value, or market value changes.
► Has there been a recent capital raising?
When a company has recently successfully undertaken a capital raising this may provide relevant information. It is noted that a capital raising price is usually based on a valuation model. This price may differ from the price that is obtainable in the secondary market.
► Have shares been issued during the year pursuant to a share purchase plan?
The company may have an employee share ownership plan where shares have been issued during the year. Such plans use a valuation model to evidence the market value. The valuation model fair value basis is usually provided in summary within a company’s financial report.
► Has the company issued shares for convertible debt during the year?
Where the company has issued shares for convertible debt during the year, depending on the terms of the debt to share conversion, this may provide evidence of a relevant market value.
So, there are multiple sources that may provide relevant market value information for an unlisted investment. For this reason, when investing in an unlisted investment, it is recommended that a trustee –
► gathers a variety of evidence especially where there is no secondary market
► engages with the investment provider proactively for documentation
►maintains a file of supporting data each year for audit
If you are not sure that you have relevant or sufficient information to support your unlisted investment market value, please don’t hesitate to reach out. We’re here to work with you, so that you gather documentation effectively, to support the ATO market value guidance and are audit ready.
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