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Misconceptions surround SMSF asset valuations

Practitioner misunderstanding regarding market valuations for SMSF assets remains prevalent, especially issues such as when a valuation is needed and who can provide one, according to a specialist sector auditor.

“The biggest misconception I come across in the industry is that assets have to be valued every three years by a qualified valuer. That’s never been legislation in the 12 years I have been involved with the SMSF sector and the tax office has always published information to say anyone can provide the valuation,” ARC Super director Ashley Course told delegates at the inaugural Institute of Public Accountants National Congress on the Gold Coast.

“Mickey Mouse can value a property as long as Micky Mouse is given sufficient appropriate evidence to provide the auditor on which the auditor can form his opinion.”

Course said the Superannuation Industry (Supervision) Act only specified one instance where a valuation from a qualified valuer needed to be performed.

“Collectables and personal assets have to be valued by a qualified valuer when they are disposed of to a related party,” he said.

“If you’re not disposing of them during the year, legislation doesn’t require a qualified valuer report.”

In highlighting this area of the legislation, he pointed out the risk associated with market valuations lay not with the valuation itself, but the fact the transaction involved related parties.

“The risk is when we’re dealing with related parties and the risk is the related party will use the transaction as a way to get more super out [of the fund] or to preserve more of the member’s benefit by paying less than what market value is,” he said.

In general, he said SMSFs did not need to revalue assets unless something had happened that could significantly change asset values.

He referred to examples contained in the Australian Taxation Office guidelines that indicated how frequently assets needed to be valued.

These include factors such as natural disasters, macroeconomic events, market volatility and if the character of the asset has been changed.

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