SMSFs hitting valuation hurdles with lack of data
With some SMSF clients struggling to obtain valuations for properties even where a valuer has been appointed due to a lack of data, SMSF auditors have been urged to include details about the impact of COVID-19 in the contravention report.
SuperConcepts SMSF technical specialist Anthony Cullen said there have been circumstances for some SMSF clients where valuations have been obtained beyond just a curbside appraisal and the latest sale figures that the valuers have to go by are pre-COVID-19.
Mr Cullen said this means that the valuer is unable to determine the effect of COVID-19 on the value at that particular time.
“It really depends on the auditor as to how they take that. Obviously, the trustees have tried to obtain as much information as they possibly can and sometimes it’s outside of their control,” Mr Cullen told SMSF Adviser.
“If you think about what’s going on in Victoria, trying to get that additional information and sales values would be reasonably difficult at this point in time.”
It is up to auditors and accountants, he said, to work together to ensure they get as much information from the trustees as they possibly can.
“It will come down to materiality as well. If the property, for example, forms a large percentage of the fund, then there may be concern from the auditor’s point of view, so then it’s really up to them whether they go down the management letter, Part A or Part B qualification path,” he said.
“So far, based on the information that we’re getting our clients to obtain, the auditors are tending to look at Part A more so than Part B.”
Where the SMSF auditor does decide to go through with the Part B qualification and contravention report, then ideally auditors are including information about the lack of availability of information due to the impact of COVID-19, he said.
“I think it’s incumbent on the accountants to make sure that if the auditors are going to lodge qualified audit reports, that they take the time to document the circumstantial evidence rather than just saying there’s a regulation 8.02B breach and full stop nothing more,” he stressed.
“We want our auditors to add that little bit of extra information to give our clients and the trustees comfort that the auditors understand that they might not be able to get that information due to COVID-19 and that the ATO will also understand that as well.”
Mr Cullen said SMSF clients obviously don’t like the idea of receiving qualified audit reports and getting on the wrong side of the ATO.
“If we can [say] ‘Look, the auditors have lodged a contravention, they’ve identified that it’s a COVID-19 issue and the ATO has already said that if it’s a COVID-19 issue that they won’t take action on that’, that provides some comfort to the client,” he said.
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.