SMSF trustees will need to supply detailed evidence on the valuation of an asset within their fund and can no longer rely on minutes as the only record of that value, according to an SMSF technical expert.
Heffron SMSF technical and education services director Leigh Mansell said recently updated ATO guidance on market valuations of assets in SMSFs now requires trustees to provide a higher standard of evidence and ensure that evidence is provided to the fund’s auditor.
“The ATO made an announcement back in October about this issue, but updated their valuation guidelines earlier this month,” Mansell said during a recent webinar.
“What they are now saying, in terms of acceptable evidence for assets like real property, is a trustee minute on its own won’t be acceptable evidence.”
She noted trustees do obtain evidence of the value of assets, but do not provide that to their auditor, however, they are now required to do so.
“The ATO have said if a trustee is going to rely on something like a kerbside valuation from the real estate agent, that will be fine, but rather than just getting a one-page letter with that valuation, the trustee needs to make sure they get some comparable sales data that is going to back up the valuation given to you by the real estate agent,” she said.
She added the requirement for acceptable valuation evidence also applied to an unlisted asset, such as unlisted shares or unlisted unit trusts.
“You need to unpeel that onion because those entities own things and since they are not SMSFs and not governed by the Superannuation Industry (Supervision) Act, and so are not valuing everything back to the market,” she said.
“Make sure to drill into those financial statements where you might need to do some valuation methodology on the underlying assets, which might be hard to do if you are not a controlling unitholder or shareholder.
“The ATO has changed their approach and they want to see that objective evidence on file and trustees need to give it to the auditor, who needs to be able to see it and there needs to be evidence of them seeing it as well.
“The ATO have come out publicly, and their view as to what their expectations are has been on the record for about 10 months, but now they want to make sure that that evidence is actually on file, so there is more legwork to do there for all the players in the mix.”
