A specialist auditor has warned practitioners not to rely too heavily on tools provided on the internet to value a residential property held inside an SMSF.
Speaking at the Institute of Financial Professionals Conference 2023, Super Sphere director Belinda Aisbett told delegates: “Online valuation tools may be helpful, but they also may not be very helpful. I know that [is a statement akin to asking] how long is a piece of string and it is a little bit challenging to know what to give your auditor, but if you’re not 100 per cent sure, then ask your auditor.”
Aisbett said telling the fund’s auditor where the information was sourced will help determine if the valuation is of any use.
“It will depend on the confidence level that those online providers can give you. If you go to realestate.com and put in your property address, it will tell you this is what we think it’s worth. [The valuation] will have a low confidence, medium confidence or high confidence [attached to it],” she noted.
In addition, if an online valuation service provides a residential property valuation defined by a price range, the breadth of that range will also determine the reliability of that service, she pointed out.
“For example, something that is [valued at] between $750,000 and $1.2 million [will mean] the auditor is not going to look at it. It’s too broad a range,” she noted.
“Even if you take the midpoint, you’ve got a material movement from one side to the other and it’s just not relevant.”
She indicated her preference as an auditor was to have a physical valuation performed by a real estate agent who has actually inspected the property versus a valuation electronically calculated by a computer.
Further, she took the opportunity to stress council rates notices cannot be used as the basis for a residential property valuation.
“Rates notices are not audit evidence. They have nothing to do with the value of the property,” she said.
Reinforcing this point, she questioned the merits of the practice from a common-sense perspective as well.
“Would we all not cry if your rates notice said this is the value of your property if that was right? We would all just be horrified if it was so low,” she noted.
