For many of our clients, the main reason they have a self managed superfund (SMSF) is to purchase property. This can be either commercial property (known as ‘business real property’) or residential property.
As a trustee of a SMSF, you are required to ensure all assets and liabilities within the fund are valued at market value at 30 June each year. This is particularly important when a fund owns property. Up until the onset of Covid-19, auditors have generally been happy with market valuations for property to be undertaken every 3 years. However, with the uncertainty with commercial tenants, rent relief measures (under Covid-19) and the increase in property prices, this has triggered a change in valuation requirements by auditors and the ATO.
Due to market volatility, properties held within a SMSF are required to be valued every year. This applies to both residential and commercial properties. While the valuation isn’t required to be done by an independent registered valuer (although it is recommended), it needs to be based on objective and supportable data. This could be documented recent comparable sales in the same area as your property or performed by a real estate agent.
From the ATO’s point of view, it’s the valuation process that’s important rather than the person conducting it. SMSF trustees can generally value fund assets themselves provided they use objective and supportable data as the basis for their valuations. The exception to this is collectables and personal use assets held with a SMSF.
So while it may be frustrating to have to undertake a property valuation every year, it is a duty, you, as the trustee of the fund, are obliged to undertake.
Author
Kim Jay
