SMSF Property Valuation: Ensuring ATO Compliance

With the close of the financial year and SMSF annual financial reporting underway, ensuring a substantiated market value for fund-held property assets is vital for compliant reporting. The ATO has recently expressed concerns about stagnant SMSF valuations, making this a likely focus for audit and scrutiny this year.
Acumentis recently held a webinar with BGL Corporate Solutions, sharing tips on SMSF property valuations to ensure ATO compliance. This is particularly relevant given the dynamic property market over the past several years, influenced most recently by factors including inflation, interest rate rises, weather events, and construction cost escalations.

You can view the webinar here:

The webinar discussion raised several key questions, which we’ve answered in the summary below.

SMSF Property Valuation Frequently Asked Questions

Q. How often does an SMSF need to value property?

Asset valuations are crucial to preparing annual Self-Managed Super Fund (SMSF) financial reports. The ATO mandates that assets must be valued at market value, and trustees must provide objective evidence to support the valuation. Annual reporting is required, which suggests market value is required every year.
Substantial events, such as physical changes to the asset or significant market value shifts, may also necessitate updated valuations. It is essential to stay updated with market changes and adjust property asset valuations accordingly.

Q. Is there a connection between market value and council rates valuation?

Yes, there is a connection, but council rate valuations don’t typically use accepted methodologies to meet the ATO market value definition. They usually form part of a general valuation process, applying a mass appraisal approach. These rates notice alone won’t clearly provide supporting data, so they would not meet the ATO guidelines. It’s recommended to seek professional advice when dealing with property valuations and related taxes.

Q. Is a letter from a real estate agent sufficient to demonstrate a property's market value?

Typically, an appraisal or letter from a real estate agent indicating the market value of a property may not meet ATO guidelines for SMSFs. A compliant report should detail the valuation methodology, include supporting data like comparable property prices, and specify the adopted figures for both the market and rental valuations. Ensure the provider is familiar with ATO guidelines and can produce a compliant report.

Q. If the $3 million cap is approved, will the ATO need to issue a more definitive ruling on market values?

This is a standard topic with SMSF clients. The implications are speculative until the legislation is enacted. However, a March 2024 ATO article suggests increased scrutiny on funds not updating asset values annually, which may intensify with the new legislation.

Q. How do you value a property when no comparable sales data is available?

This question involves general valuation principles. We expand the search to other areas and apply suitable locational adjustments for unique assets. This also applies to specialised commercial assets, using rates and yields from various regions to provide insights for adjustment. Choosing the appropriate valuation method based on the asset and evidence is crucial. If Direct Comparison is limited, methods like Capitalisation or Summation Approaches can be used to establish market value.

Q. How much does an Acumentis SMSF property assessment cost?

To address market needs, Acumentis has developed a cost-effective and efficient desktop assessment that adheres to ATO guidelines for SMSF-held properties. Prices for 2024 are as follows, with specialised properties quoted separately:

  • Residential (up to $1M) – $295 + GST
  • Commercial – From $660 + GST
  • Rural | Agribusiness – From $650 + GST

View the full fee schedule here.

By addressing these FAQs, SMSF trustees can better understand the importance of accurate property valuations to ensure compliance with ATO requirements.

Click here to view more SMSF FAQs

With continual changes in the property market and increased scrutiny of unchanged asset values, Acumentis offers cost-effective and efficient SMSF desktop assessments for residential, commercial, rural, and agribusiness properties. Simplify annual market value reporting and avoid auditor reworks with our support.

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