When should I obtain an SMSF asset valuation?
A whole range of events requires you to obtain a valuation of the assets within your self-managed super fund. These include:
- When preparing the SMSF financial accounts and statements
- When executing the transfer and sale of collectibles and personal use assets
- When transferring assets between SMSFs and related and unrelated parties
- When a pension is commenced
- When establishing whether assets are eligible for CGT relief (16/17 FY)
- When establishing whether the SMSF’s in-house assets exceed the 5% rule
- When calculating members’ total super balances for financial reporting
- When a significant event may have affected the value of an asset (eg. natural disaster, macro-economic events, changes to the asset).
In simple terms, assets within an SMSF must be valued regularly to track performance, allowing for the commencement of a pension, calculating the in-house asset 5% test, and any other event for which a member’s total balance must be evidenced.
Why do my SMSF assets and properties need a valuation?
Managing SMSF assets and obtaining the valuation of SMSF property is important for your fund’s compliance and for tracking its asset performance.
SMSF property and asset valuations may affect the total value of your fund and, therefore, your eligibility to make concessional contributions and access available bring-forward facilities.
Similarly, SMSF asset valuations can provide insights into your fund’s performance, helping to inform investment decisions and the date upon which SMSF members may choose to commence a pension.
An annual valuation is required at the end of each financial year to appropriately track the change in the value of assets within an SMSF. However, the ATO does not always require an independent qualified valuer to carry out these valuations.
How do I obtain a valuation of SMSF property and other assets?
Asset and property valuation requirements for SMSFs vary by asset class.
There are two instances in which the ATO stipulates that a qualified independent valuer must undertake the valuation:
- from 1 July 2011 for any collectables and personal use assets that were acquired on or after 1 July 2011 and disposed of to a related party
- from 1 July 2016 for any collectables or personal use assets that were acquired by the SMSF before 1 July 2011 and disposed of to a related party after 30 June 2016.
All other evaluations can be conducted by a qualified or unqualified individual, as long as there is reasonable evidence of their expertise in valuing the asset in question and the valuation is based on objective and supportable data.
It’s often recommended that properties within an SMSF are independently valued at least every three years, or after any significant event that may have positively or negatively impacted the asset’s value.
When an SMSF is acquiring assets from a related or unrelated party (following the ATO guidelines on permitted asset transfers), all transactions must be made on an arm’s length basis and at current market value. In these instances, the ATO recommends SMSF trustees consider a qualified independent valuation when the value of the asset in question represents a significant proportion of the fund’s value or when circumstances suggest a complex transaction.
Aside from the few asset classes requiring qualified independent valuations, the ATO states that many SMSF assets can be valued using a ‘fair and reasonable’ process. When obtaining valuations for SMSF assets and property, ensure that all valuation calculations can be substantiated and reasonably explained to a third party.
For more information on SMSF property valuations or valuations of other assets within your SMSF, contact SMSF Valuation Reports.
Information in this article is general in nature and does not represent true SMSF financial advice.