A business real property within an SMSF that has been rezoned could have implications for asset valuations and attract the attention of regulatory bodies, an SMSF legal expert has warned.
DBA Lawyers senior associate Shaun Backhaus said a change in market conditions could impact the asset valuation of properties in areas that have been rezoned and SMSF trustees needed to be aware of those changes.
“We have worked on matters where it raised questions regarding at what point in time did the taxpayer know about the likely rezoning, which do not happen straightaway,” Backhaus said during a webinar late last week.
“There will be years of lead-up and consultation, including different council documents and after [the taxpayer] might be communicating with the council.
“It’s not as simple as pointing out when the rezone officially happened; it could also be periods beforehand that the taxpayer would have known the value was now more due to the likely rezoning.”
He noted issues with valuations usually crystallised once an area was officially rezoned and SMSFs need to be aware of what led to that event.
“If you have got a massive upswing in value, the ATO will care about it, and I’ve seen them drill down pretty hard on what a taxpayer has known about beforehand,” he said.
He said other events could also have an impact on the value of a property, such as the coronavirus pandemic, and suggested SMSFs obtain a new valuation or supplementary evidence when that occurs.
“It is expected that if the property is a large part of the fund to consider external valuers more often despite funds not being required to obtain an external valuation each income year,” he said.
“It will certainly ensure the external valuation can be used to support the market value for real property.”
He added any valuation evidence should contain a range of information, such as the value of similar properties in the area, the amount paid, when the property was purchased and if it was done so recently, and appraisals from a real estate agent.