Author: Brenda Hutchinson, Partner, TAG Financial Services
In our recent SMSF Audit Update, there were a lot of questions about the valuations needed for a SMSF. Here is some information and resources on the subject that you might find useful.
The ATO’s “Valuation Guidelines for Self-Managed Super Funds” can be found at:
The guidelines replace Superannuation Circular 2003/1.
The valuation guidelines are broken down into 5 areas:
- Our approach to valuations
- Why assets need to be valued
- Valuer
- General valuation principles
- Terms we use
Under “Why assets need to be valued”, Table 1 is a summary of valuation requirements.
The first item in the table is that assets need to be valued for preparing the SMSF financial accounts and statements. One of the areas that received the most questions during the webinar was in relation to valuations of real property.
This valuation falls within the requirements of preparing the SMSF financial accounts, as assets in the financial statements must be valued at market value.
Under “General valuation principles”, it provides the following:
- If you choose to obtain an external valuation, you do not need to have a valuation done each year.
- You are required to provide support for your valuation each year, but this can be based on factors other than an external valuation.
- There is a section for specific requirements for asset classes and real property is included here.
- When valuing real property, relevant factors and considerations may include:
– The value of similar properties and recent comparable sales results.
– The amount that was paid for the property is an arm’s length market
– If the purchase was recent and no events have materially affected its value since the purchase
– Independent appraisals from a real estate agent (kerbside).
– Whether the property has undergone improvements since it was last valued
– The rates notice (if consistent with other valuation evidence).
– For commercial properties, net income yields (not sufficient on their own and only appropriate where tenants are unrelated). - The valuation can be undertaken by anyone as long as it is based on objective and supportable data.
- Generally, you should use more than one of the methods above to support the valuation (unless the property has been recently purchased).
- If you choose to obtain an external valuation, you do not need to have a valuation done each year.
Any questions?
If you have any questions, please contact us on 03 9886 0800 or via email.
Specialist Advice
If you would like to discuss a project, please contact us. Our advice is quoted upfront for your approval before commencement.
Webinars On Demand
We have lots of informative webinars by our financial experts. Watch them any time on demand.
Seminar On Demand
To purchase the 2022 online seminar sessions click here.
Disclaimer: The information contained is general in nature. Professional advice should be sought before acting on any aspect on this page. Financial planning services provided by TAG Financial Advisors Pty Ltd (ABN 77 154 205 017 AFSL 415632), a wholly owned subsidiary of TAG Financial Services Pty Ltd (ABN 67 075 374 686). Copyright 2022. Please do not reproduce without the expressed written consent of the author.