SMSFs reporting real property assets must ensure they provide sufficient evidence in line with the latest ATO guidance to support valuations, a technical expert has said.
Highlighting the latest market valuation guidance from the ATO, Smarter SMSF chief executive Aaron Dunn said the regulator would not consider real estate agent appraisals stating the amount a property is likely to sell for to be sufficient evidence, unless such appraisals were supported by objective and supportable data.
“What the ATO has come out and said is that when we’re looking at appraisals, the critical thing here is that appraisals are okay, but they do need to come with supportable evidence,” Dunn said today during a Smarter SMSF webinar.
“What they have made very clear in the guidance is what is not acceptable [on its own] is a real estate agent appraisal stating what [the property] is likely to sell for.”
He noted that while the regulator might accept such evidence as a contract of sale if the property purchase was recent, or comparable sales results from the same period, the ATO would not, as a rule, accept single items of evidence to back up real property market valuations.
“Generally, a single item of evidence will not be sufficient enough on its own unless the property was sold recently,” he pointed out.
“So we’re not just looking at one piece of documentation here to support what that market valuation guidance might be. We may need to be exploring a range of documents to support that evidence.”
In an update on its website last week, the ATO reminded trustees they would still be required to provide asset valuations for their fund for the 2020 and 2021 financial years, but would not be penalised if they could prove they were unable to report that value because of the coronavirus pandemic.
In May, ATO SMSF auditor portfolio director Kellie Grant said the regulator was expecting to see more instances of SMSF auditors having to modify their independent audit reports due to the increased difficulty of obtaining sufficient evidence that an asset valuation was appropriate under the current COVID-19 economic environment.