SMSF auditors are having difficulty applying the property valuation guidance provided by the ATO, finding it impractical from their own compliance perspective.
“The ATO guidance on valuations is a little [confusing] and that creates no end of frustration and challenges for us in practice. What the ATO has said is you don’t need to get or source valuation information for your property, for example, there’s been no significant event [that has affected that asset],” Super Sphere director Belinda Aisbett revealed during her presentation at the Self-managed Independent Superannuation Funds Association 2022 SMSF Forum in Melbourne last week.
“I look at that and [ask]: How do I as your auditor know whether you’ve had or have not had a significant event unless you give me some valuation information to show [the asset] hasn’t changed in value?
“So as much as the ATO says one thing, in theory that sounds great, but in practice what have I got to hang my hat on as the auditor? How do I sign off that that property hasn’t changed its value in the last two years just because [the client says] so?
“That’s not sufficient and appropriate audit evidence and my auditing standards would not allow me to sign off on it.”
She pointed out there is an additional conundrum from the regulator’s instruction requiring trustees and auditors to source a variety of information to substantiate the market value of a property and as such one item of evidence will not be acceptable.
“[In order to satisfy this requirement, does] the client go to a second [real estate] agent [for an appraisal]?” she said.
“And what if the two agents [asked to provide a valuation] have different values [for the property]? Do you [then] split the difference and take the midpoint between the two?
“It’s very I think clunky is probably the best word [to describe it].”