Shelley Banton, head of technical for ASF Audits, told SMSF Adviser that property valuations may be the next bastion impacted by the development of AI in preparing market valuations.
Banton’s comments come after the NSW Valuer General announced this week that it would be moving to undertake half of its annual 2.7 million valuations in-house using large datasets, which, with the use of AI, will allow for simplification of many of the processes.
AI is already used to group comparable properties looking for attributes homes may have in common, such as designated street frontage, or for commercial properties looking at commonalities, such as gross floor area.
Banton said trustees are always looking for cost-effective options to value property, especially with the renewed focus on market valuations by the ATO.
“The market valuation campaign sent out by the ATO targeted 16,500 SMSF trustees and over 1,000 SMSF auditors to ensure they were valuing assets every year. It identified those funds with assets such as residential and commercial property and unlisted entities with the same value over the last three years,” she said.
“Auditors associated with these funds, who did not report a breach of r8.02B to the ATO, received an email reminding them of their responsibilities under SIS and the auditing standards. While not compulsory to obtain an independent market valuation, SMSF trustees must provide objective and supportable evidence to demonstrate how they reached their conclusion.”
She continued that trustees have several ways to determine the market value of their property at their disposal, including comparable sales, capitalisation of net income, and online commercial or desktop property reports.
“While some methods come with a cost, an alternative AI-generated property market valuation report is instant, efficient, and will use large datasets to process a valuation,” she said.
“However, any valuation will have to meet the requirements of the valuation guidelines issued by the ATO. The challenge for trustees is to ensure that a property valuation generated by AI has sufficient appropriate audit evidence. It will ensure that SMSF auditors can understand the specific methodology adopted by the trustees and that it was based on careful consideration and sound judgement.”
Banton said that with the risk of compliance breaches, triggering the non-arm’s length income (NALI) provisions, and the impact of Div 296 already a big industry discussion point, any alternative property market valuation techniques that will reduce costs, save time, and continue to comply will be pursued by trustees.
“And AI, no doubt, has a part to play in that,” she said.
