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ATO updates valuation guidelines

ATO valuation guideline

The ATO has released a new guideline for the valuation of assets, and reminds SMSFs to stay on top of their reporting obligations in a number of key areas.

The ATO has released a new guideline for the valuation of assets inside an SMSF, noting that while it would accept reasonable calculations, trustees are responsible for their accuracy.

In an update on its website, the ATO stated trustees were not to approach the guideline as a comprehensive handbook for the valuation of assets within an SMSF and reminded trustees it was their obligation to responsibly manage SMSF investments.

The regulator added SMSF trustees were encouraged to follow the guide – which has replaced Superannuation Circular 2003/1 – and a failure to do so may result in a review of the valuation process as part of a compliance check.

To increase the likelihood of a valuation being accepted, trustees need to confirm an asset’s value does not conflict with a market valuation, there was no evidence a different value was used for capital gains tax and evidence was supported by objective data.

The guidelines also reminded trustees an asset valuation is required to confirm an SMSF has complied with laws around the acquisition of assets between an SMSF and a related party and the investments were made on an arm’s-length basis.

Valuations were also to be used to determine the value of assets supporting a pension and new and existing retirement income streams.

In conjunction with the new guidelines, the ATO also updated its information regarding when an SMSF should report on key events.

Events where an SMSF member’s transfer balance account is impacted, including the commencement of a retirement-phase income stream, limited recourse borrowing arrangement payments, compliance with a commutation authority issues by the ATO and personal injury contributions, must all be reported.

In addition, the update reminded members an SMSF will not need to report for pension payments, investment earnings and losses, and income streams that ceased due to poor interest or the death of a member.

The ATO stated it would be taking an “educative and supportive approach” where a transfer balance account report was lodged late, but encouraged funds to report early to avoid consequences.

“If the SMSF is late reporting a commutation made after we issued an excess transfer balance determination to the member, we may send a commutation authority to their fund, putting the member at risk of having the excess amount removed from retirement phase twice,” it said.

“In the future, an SMSF may be subject to compliance action and penalties. We don’t intend to deny exempt current pension income claims if an SMSF doesn’t report their transfer balance cap on time.”

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