Asset Values – The Critical Link to New SMSF Tax Laws

An increase or decrease in the value of your property assets will be a key factor for SMSF investors to consider.

SMSF property assets should already be assessed each year for your annual reports.
Knowing the value of your property assets is becoming increasingly crucial as we head towards the introduction of new legislation that includes a $3M threshold and an additional 15% tax levy on SMSF earnings. The introduction of the new SMSF tax levy is proposed to take effect from 1 July 2025.

The Importance of Regular Valuations

Investors need to ensure regular annual valuations are undertaken for reporting and auditing purposes. They should also review the current status of their portfolio assets to identify if the $3 million cap is at risk of being exceeded – this will become increasingly important as 1 July 2025 approaches.
Traditionally, investors expect to pay taxes on gains or losses. However, this new tax is tied to the portfolio’s performance, applying to all earnings when the balance is above $3M.

Challenges on the Horizon

Several challenges lie ahead, including inflation and a higher interest rate environment, which may place upward pressure on yields and earnings from interest. While residential property values are appreciating in many locations throughout the country, commercial assets’ performance can vary considerably based on location and asset type. Importantly, let’s not forget farming and agribusiness enterprises that are held in superannuation which are subject to fluctuations in value due to commodity demands and weather conditions. This sector has shown strong growth in many parts of Australian over the last 5 years.

The farming/agribusiness sector, being highly influenced by cyclical factors can see volatile asset performance impacting farmers’ cash flow despite being asset rich. Nevertheless, favorable and steady conditions leading into mid-2025 could potentially drive further growth in this asset class, contributing to exceeding the new threshold.
The introduction of an additional tax specifically targeting retirement fund assets has sparked strong public debate. Many SMSF holders are understandably feeling vulnerable and financially compromised by the proposed new legislation, believing they are being unfairly discriminated against, despite their intent to provide for a fully self-funded retirement.

Empowering SMSF Investors for Sound Property Decisions

At Acumentis, our team works closely with SMSF investor clients, collaborating with their financial advisor specialists to navigate the current ATO superannuation guidelines and prepare for the introduction of this newly proposed legislation. Managing property investments diligently and seeking appropriate expertise and guidance have never been more critical.
An accurate property valuation serves as a fundamental tool for investors, given these impending changes. It’s essential to review your property portfolio and assess asset values regularly to understand the impact of future changes in asset values. If we can assist you in navigating your property decisions, please reach out to our team.

Nathan King
National Director – Advisory, State Director – WA Operations
— Perth Property Valuers
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