SMSF members looking to submit a valuation for unlisted securities or an investment in a unit trust should not only rely on financial statements, but consider all events tied to the holdings during the financial year to provide valuation data, according to a specialist auditor.
Tactical Super director Deanne Firth said the ATO had made it clear signed and audited financial statements in relation to unlisted securities or unit trusts would not be sufficient evidence on their own of the value of those assets in an SMSF.
“This means you can’t just take the net asset value of the securities or trust, divide by the number of units and there is your valuation. That’s not going to be sufficient evidence on its own for an auditor,” Firth said during a recent presentation hosted by the Institute of Financial Professionals Australia.
“You have to consider the value of the assets in the actual entity and one of the easiest ways to do this is consideration paid on acquisition. If there has been any sale of units in the current year to an unrelated party, that makes it so much easier because you’ve got an arm’s-length market price there.”
She said if the unit trust only has property, it can use the same valuation guidelines as for property held directly by the SMSF and could look to what the property is used for to gain a more accurate valuation.
“Depending on what kind of business the trust property [is used for], it can be easier or difficult to value and some properties may still need that independent valuation, but with most of them you can work something out when you see the financials and then value the property,” she said.
“If the trust asset has got loans to other entities, you can usually find out whether they are recoverable, which also provides information as to what’s going on, so you just have to look a little bit further.
“The ATO says if an independent expert valuation is not available, provide to the auditor evidence of how you substantiated it through the directors or trustees, including objective and supportable data on which they relied, and the valuation method used and any assumptions made.”