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SMSFs seeking stronger valuation evidence

Person using binoculars on a yacht.

Trustees providing more evidence and support documents for valuations.

A number of SMSF trustees are providing more evidence and support documents for asset and investment valuations to lodge with the ATO, an industry auditor has revealed.

“In some instances we are seeing trustees paying for professional valuations in order to support compliance with the valuation requirements with high-quality evidence,” Evolv executive director Ron Phipps-Ellis told selfmanagedsuper.

While it was a possibility for SMSF trustees to be tempted to use valuations that brought them below the $1.6 million transfer balance cap, the practice was not expected to be problematic, Phipps-Ellis said.

“The obvious issue is that of undervaluing assets to allow trustees to reduce their pension account balance below $1.6 million,” he said.

“And there may be a temptation to overvalue assets to lock in future gains in a tax-free environment, but we have not seen evidence of this or seen this in practice, mainly due to guidance from practitioners.”

During a recent quarterly technical update, Heffron SMSF Solutions technical services manager Leigh Mansell warned that asset valuation due diligence was a trustee duty.

“It’s one of the things you need to take into consideration even before you buy the thing in the first place – can you actually get what you need [a fair valuation] when you need to get it?” Mansell said.

“You’d want to make sure that you can get a valuation when you need it for super law and tax law purposes.”

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