Posted on Wednesday, October 2nd, 2013 in by Matt Garmony
Asset Valuations are a key component in preparing meaningful self-managed super fund (SMSF) financial reports. These have an impact on the returns for members and ultimately self-managed super funds sector performance as a whole. The valuations are also required to confirm that your self-managed super fund has complied with relevant super law for:
- Preparing the financial accounts and statements of the fund;
- Acquiring assets between SMSF’S and related parties;
- Investments made and maintained on an arm’s length basis;
- Disposing of certain collectables and personal use assets to a related party of the fund determining the market value of a SMSF in house assets as a percentage of all assets in the fund;
- Determining the value of the assets that support a member super pension.
The following is an extract from the Australian Government’s Australian Taxation Office website summarising valuation requirements.
| Event | Requirement |
| Preparing the SMSF financial accounts and statements | An asset must be valued at its market value. The valuation should be based on objective and supportable data. |
| Collectables and personal use assets – acquired after 1 July 2011 &
Transfer or sale to a related party – |
Must be made at a market price determined by a qualified independent valuer. |
| Collectables and personal use assets – acquired before 1 July 2011 &
Transfer or sale to a related party |
For the period 1 July 2011 to 30 June 2016 transfer to related parties do not require valuation by a qualified independent valuer. However these transfers should be made at an arm’s length price that is based on objective and supportable data.
From 1 July 2013 transfers to related party must be made at a market price determined by a qualified independent valuer. |
| Transfers between SMSFs and related parties | Acquisitions of permitted assets must be made at market value.
Disposals of assets must be made on arm’s length basis. |
| Transfers between SMSFs and unrelated parties | A valuation is not required however the transfer must occur at arm’s length. |
| Determining the value of assets that support a super pension | The account balance needs to be determined on the commencement day of the pension or, for ongoing pensions on 1 July of the financial year in which the pension is paid.
An annual valuation is generally not required unless there has been an event that significantly affects the value of the asset. The valuation should me based on objective and supportable data. |
| Testing whether the market value of the SMSF’s in-house assets exceed 5% of the value of total assets held by the fund | The value of a fund’s total assets needs to be determined on 30 June of the financial year the in-house assets are held.
An annual valuation is generally not required unless there has been an event that significantly affects the value of the asset. The valuation should me based on objective and supportable data. |
Although the Australian Taxation Office does not require an external valuation of real property each year, they do emphasis that recent valuations would be prudent if an event occurred that may have an effect on the value of the property since it was last valued, primarily being changes in market conditions. Other factor that may influence the market value of the property include new lease agreements, new rental reviews with increased or decreased rental values, changes in zoning and many other factors that may influence the market value of a property. It is for this reason that we recommend that you contact one of the valuers at Garmony Property Consultants for your valuation needs.
From our experience a recent trend of transferring real property from Family Trusts to Self-Managed Superannuation Funds requires a market valuation of the asset under the Australian Tax Office rulings. The valuers at Garmony Property Consultants can assist you with this and also assist with advising you on the current market rental values that the investment property should achieve. For further information in relation to your self-managed super fund requirements we suggest that you liaise with your accountant or financial advisor for further information, and then contact the licenced valuers at Garmony Property Consultants for your property valuation requirements.