Flimsy property valuations exposing SMSFs to risks
Many SMSFs with property assets have not sought formal valuations of where they’re applying the CGT relief, which could see the fund attract further scrutiny from the ATO, says an SMSF auditor.
Hayes Knight director of SMSF, Ray Itaoui said assets within a super fund always need to be carried at market value, but with the changes to superannuation, the valuation of an asset has become even more significant, particularly where they’re resetting the cost base this year.
“We're seeing funds that have reset the cost base on the property, and haven't actually obtained a formal valuation,” said Mr Itaoui.
If a formal valuation is in place then it’ll be difficult for anyone to dispute the valuation, because it’s an independent valuation from a valuer, he explained.
“In terms of properties being adjusted at 30 June, we're seeing a lot of trustees resetting cost bases without actually obtaining a formal valuation. So they're getting a real estate agent appraisal or they're using their own value by coming up with a figure,” he said.
“In terms of an audit, that could be acceptable, but it just creates a really large risk because the trustees are obviously heavily invested in trying to increase the value of that property as much as possible in terms of the reset of the cost base.”
Last month, ATO assistant commissioner Kasey Macfarlane said an independent valuation by a professional valuer is one of the strongest pieces of objective evidence to support a value that an SMSF trustee can use.
She also stressed that the value used for an asset for the purposes of the CGT relief should be the same value used for the purposes of total superannuation balance and transfer balance cap purposes.
“It’s one of those areas where auditors should be really diligent with ensuring that the market value has been completed correctly,” said Mr Itaoui.
Miranda Brownlee is the deputy editor of SMSF Adviser, which is the leading source of news, strategy and educational content for professionals working in the SMSF sector.
Since joining the team in 2014, Miranda has been responsible for breaking some of the biggest superannuation stories in Australia, and has reported extensively on technical strategy and legislative updates. Miranda has also directed SMSF Adviser's print publication for several years.
Miranda also has broad business and financial services reporting experience, having written for titles including Investor Daily, ifa and Accountants Daily.