Not so long ago it was commonplace for Self-Managed Superannuation Funds (SMSF) trustees to revalue their property assets every 3 years. This was simply long-standing industry practice, assuming the property values don’t change quickly and therefore getting a new valuation every 3 years was appropriate. Even then there was no specific rule stipulating that valuations each 3 years were required.
However, increasingly there are so many tax rules that depend on the reporting of asset values and therefore a members superannuation balance. This therefore requires trustees to place a true value on all assets of the fund. For example, the exact amount a member has in super can dictate how much they can contribute to super as non-concessional contributions, the amount they might have to withdraw from their pension each year for pension purposes, and how much of their fund can be converted into a pension. There are many more such laws. We have recently seen the Australian Taxation Office (ATO) and therefore your SMSF auditor taking a more active stance regarding investments valuations and requiring assets to be re valued more often.
Whilst we can easily revalue listed share investments other investment classes such as property assets and alternative asset classes will require trustees to consider valuations on an annual basis.
Ruling Reference TR 2010/1 does not require the trustees to obtain a formal, expensive valuation, but increasingly we expect to see auditors requiring some level of external support for the trustees view on asset values. That may simply be a property appraisal from a local real estate agent.
For PrincipleFocus clients please understand the reasoning, and the regulatory drivers, including audit requirements, for our team asking you more often for evidence supporting increasing asset values in your fund.