SMSF members looking for a valuation of fund assets should still consider the use of a qualified independent valuer, which can act as a form of cheap insurance to prevent expensive errors when transferring an asset into a fund, a technical expert has claimed.
Colonial First State head of technical services Craig Day said valuation guidelines from the ATO regarding assets in SMSFs do not require the use of a qualified independent valuer, except where a valuation relates to collectables.
“If you are acquiring an asset, anyone can undertake valuation of that asset. The question is, should you do it yourself if you are a member of the fund just because potentially you can?” Day said during a briefing at the ASF Audits Technical Seminar 2021 on Friday.
He highlighted the ATO guidelines released earlier this year did not focus on who carried out a valuation, but rather the process used, and noted it had to be logical and supported by data, while considering all factors that could impact the value, and had to be explainable to a third party.
“Now in relation to qualified independent valuers, you don’t need to use them, but should you?” he asked, adding the ATO noted their usefulness when an asset represented a significant portion of a fund’s value or the nature of an asset meant the valuation was difficult or complex.
“A qualified independent valuer is a very cheap insurance policy and they give protection against breaching the non-arm’s-length expense rules.
“If we do something like transferring a property into an SMSF that has stamp duty costs that don’t have an exemption, and it has to be transferred back out because the auditor or ATO are not satisfied with the valuation I have used, that’s double stamp duty.
“Now compare those to the cost of an independent sworn valuation and the latter is a low cost to protect myself from the potential implications of having all those additional transaction costs hit again on the way out.”
