These assets include residential and commercial property, unlisted companies and unlisted trust investments.
Additionally, the regulator said there were more than 1,000 SMSF auditors associated with this high-risk population and its data reveals no auditor contravention reports (ACRs) were lodged for potential breaches of the market valuation rules for the assets.
The ATO is increasingly using data to identify and deal with risks and has recently identified a number of funds that have maintained the same values on reported SMSF assets in their annual return.
It stated there are concerns these funds may not be meeting their legal requirement to value and report their assets at “market value” every year.
The regulator has now started to send targeted messages to trustees and auditors about this obligation and will be monitoring the approach taken by the funds in their next annual return.
The ATO has reminded SMSF trustees that they must value their assets each year and provide supporting evidence to their auditor.
The regulator said a key responsibility of trustees every income year is valuing their fund’s assets at “market value” and before lodging the fund’s annual return, the retained auditor is required to check the assets have been valued correctly and assess and document whether the basis for the valuation is appropriate.
The ATO said trustees should be aware that if their asset valuations fail to meet the valuation requirements, the fund and members may have additional tax to pay and they could be liable for administrative penalties.
Additionally, as part of the annual audit process, trustees must provide objective and supportable evidence to their SMSF auditor to support the valuation of their fund assets. This includes providing all relevant documents specifically requested by the auditor.
I doubt any SMSF will engage a qualified valuer in the future!
The ATO market value guidelines stipulate that a valuation by a qualified valuer need not be done every year. Of course they don’t specify a time frame e.g. like 3 years. The ATO have never ever stipulated this. There is no “3 year rule” and there never has been, it was an industry “rule of thumb”.
The ATO go on to say ( stupidly in my opinion) that if a qualified valuation is obtained, that supportable evidence is required each other year that the value hasn’t changed. Hello? I’m an accountant, not qualified in real estate and I’m not about to go chasing property information on google or let my staff waste time surfing the net on that, and I don’t know any SMSF trustee who will go and do this themselves and not expect it done for them!
What does this mean then? An “appraisal” every other year perhaps?
So back to my first point, why would you obtain an expensive valuation from a qualified valuer, if you need appraisals every other year, when you can just get an appraisal every year!
There are plenty of services now providing detailed appraisal services for both commercial and residential property that auditors will accept.
Yes, yes, it may be a unique property or a high percentage of the funds assets so valuations may have a place still, but if the auditor will accept it as they will for 99% of properties, why would any SMSF even go near a registered valuer from now on for their year end reporting!
Auditors / Administrators
Please note – Values cannot be the same as last year – change them up or down
However it will be a good idea if you look at market growth % of the suburb for land puposes – although the house is a depreciating asset.
Commercial properties is where it starts to get complicated as there is very limited data and each property is very unique.
You need valuations in accumulation phase, in case of divorce / exit / death etc…
Unless a fund is in pension phase why is this completely deadweight cost being imposed on SMSFs at all? This needs to be reformed. If the trustees of an accumulation phase only fund believes they need an independent valuation then let them choose to do so. Surely that’s what self managed means.
Don’t forget TSB for NCC’s and bring forward and catch up cc’s eligibility.
Unfortunately the system is a gordonian knot of complexity that treasury just keeps pulling on to continually make things worse.
In the bright side it keeps you and I in a job. 🙂