Assets to be valued at Market Value

SMSF assets to be valued at market value

For 2012-13 income year and any later years of income, SMSFs are required to use market value reporting for their financial accounts and statements.

The ATO expects trustees to consider the value of fund assets each year. This does not mean trustees need to do an external valuation for all assets each year. For example, assets such as real property may not need an annual valuation unless a significant event occurred that may change its value since it was last valued.  Examples of such events are listed below.

On the other hand, assets such as cash, widely held managed funds and listed securities can be valued easily each year and should be valued at the end of each financial year.

Generally, the valuation can be undertaken by anyone as long as it is based on objective and supportable data.

Consider the use of a qualified independent valuer if either:

  • An asset represents a significant proportion of the fund’s value
  • The nature of the asset indicates that the valuation is likely to be complex.

Real property

For preparing SMSF financial reports, an external valuation of real property is not required each year. A recent valuation however would be prudent if an event occurred that may have affected the value of the property since it was last valued. This may be due to change in conditions or a natural disaster.

When valuing real property, relevant factors and considerations may include:

  • The value of similar properties
  • The amount that was paid for the property in an arm’s length market
  • Independent appraisals
  • Whether the property has undergone improvements since it was last valued
  • For commercial properties, net income yields.

Business real property acquired from a related party of the SMSF must be made at market value. Real property disposed of to a related party of the SMSF must be conducted at arm’s length.

When valuing real property assets for SMSF financial reports, the valuation may be undertaken by anyone as long it is based on objective and supportable data. A valuation undertaken by a property valuation service provider, including online services or real estate agent would be acceptable.

Valuation should be undertaken when…

When valuing of assets for the preparation of SMSF financial accounts and statements, the in-house asset test or determining value of assets that support a pension, a recent valuation should be undertaken where there has been a significant event that affects the value of an asset. These events may include:

  • A natural disaster
  • Macro-economic events
  • Market volatility
  • Changes to the character of the asset.