The ATO has insisted SMSF trustees include comparable sales data in a kerbside valuation for property, which can cause significant delays for funds with no such evidence, but an expert has suggested there are alternative options.
ASF Audits head of education Shelley Banton said it can be difficult to find additional evidence in regards to a property valuation that can satisfy SMSF auditors.
“Finding evidence to confirm an asset’s value and satisfy SMSF auditors can be challenging, especially for complex assets such as property and unlisted entities,” Banton said in a recently published column.
“Alternatively, the kerbside valuation and another form of evidence may be sufficient, such as a market yield calculation.
“However, additional scrutiny is required to determine whether the yield is acceptable and consider the property’s age, use, location and whether there was a change in tenancy.”
In the event where the property has been leased to an unrelated party, this methodology is acceptable and she further suggested trustees submit work papers that detail the calculations used for unrelated tenants.
She noted it could also be possible for a related-party tenant to use this methodology, provided additional evidence has confirmed the rent is at market value.
“While it is a clear-cut case of ‘it depends’, providing comparable sales evidence will be a better option for most SMSF trustees than a qualified audit report,” she said.
She said the release of the ATO’s updated property valuation requirements in October 2020 created a backlash, but pointed out they were designed to ensure SMSF auditors could do their job correctly as a lack of audit evidence for market valuations was a key reason the regulator was referring them to the Australian Securities and Investments Commission.
“When the ATO released new property valuation requirements in October 2020, it was not to make our SMSF working lives difficult (even though it did). It ensured SMSF auditors met their professional obligations under the auditing standards through its role as the regulator,” she said.
“In real terms, SMSF auditors have long accepted the risk of not meeting the auditing standards, which could easily backfire in a court of law.”
