Property Valuations in SMSF

November 27, 2020

New ATO guidance on real property valuations in SMSFs

The ATO has recently released new guidance regarding valuation of real property inside self-managed super funds (SMSFs).

Generally, all assets held within an SMSF must be reported at market value to be compliant with Regulation 8.02B of the Superannuation Industry (Supervision) Regulations 1994 (SISR).

In the past, unless the fund was paying a pension or held in-house assets, trustees could provide a valuation for fund assets every three years. This is no longer adequate, and assets must be reported at market value every year with evidence to support the valuation.

This evidence should also support the market value for the property as at 30 June of the year of audit or as close to this date as possible.

The ATO has stated that no single piece of evidence will be sufficient for this purpose, unless the property has been recently sold, but would require evidence from multiple sources in agreement. Examples of potential sources given by the ATO include:

  • independent appraisals from a real estate agent (kerbside)
  • contract of sale if the purchase is recent and no events have occurred to the property that could materially impact its value since the purchase
  • recent comparable sales results
  • rates notice (if consistent with other evidence on valuation)
  • net income yield of commercial properties (not sufficient evidence on their own and only appropriate where tenants are unrelated).

Future Assist Accountants (FAA) will follow the above guidelines regarding property valuations inside SMSFs going forward and may seek your assistance or assistance of third-party property agents/valuers on your behalf.

What happens if we don’t follow this guidance?

The ATO indicates that it is the responsibility of the trustee(s) of the fund to provide objective and supportable evidence, in accordance with these guidelines, to the auditor of their SMSF to satisfy the requirements of Regulation 8.02B. The auditor’s role is then to form an opinion on whether the provided evidence is sufficient and appropriate. If the auditor cannot form an opinion or finds the evidence otherwise lacking, this will prevent the audit of your SMSF from being finalised with further information being requested.

Regulation 8.02B and evidence required to support real property valuations | Australian Taxation Office (ato.gov.au)