The ATO has highlighted the importance of correct market valuations of assets within the annual returns of SMSFs.
In an update on its website, the ATO said the annual valuations of the assets of a fund at their market value was a key component of “meaningful” SMSF financial reports and urged trustees to ensure market valuations were performed according to the regulator’s guidelines.
“In most cases a trustee can perform the valuation,” the regulator stated.
“The important thing in all cases is the person who conducts the valuation must base their valuation on objective and supportable data.
“In some circumstances you will need to engage a qualified independent valuer, for example, if your fund transfers a collectable or a personal use asset to a related party.”
Trustees should aim to have their asset valuations completed ahead of appointing an SMSF auditor, it added.
“It is important to have the valuation done early as you will need it for the purpose of preparing your fund’s accounts and financial statements,” it said.
“It is advisable to have these ready by the time you appoint an auditor. It will make their job easier and it’s likely to reduce the time they take to complete the audit.”
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 COVID-19 economic environment.
Last year, DBA Lawyers’ Shaun Backhaus noted SMSFs should not rely on the validity of online or real estate agent-provided asset valuations, particularly where related-party transactions had taken place, as some failed to take into account factors that could affect the valuation.
