Advisers must ensure trustees comprehend the ongoing SMSF compliance requirements for any particular asset, in any type of asset class, before it is purchased to form part of a fund’s portfolio, a technical specialist has suggested.
During the latest TechHub webinar, Accurium head of education Mark Ellem told attendees: “With any asset category, including real estate, before trustees go in to buy or invest in an asset category [advisers need to make sure] the trustees understand and appreciate what the ongoing SMSF compliance and audit requirements of that particular asset category are going to be.”
With reference to cryptocurrencies, Ellem stressed trustees need to know they are going to have to provide a particular type and amount of documentation to enable the fund’s accountant to prepare the annual accounts and to the auditor every year.
“It’s the same thing for real estate. Each and every year the trustee must turn their mind to what the market value is at 30 June,” he noted.
He pointed out trustees must acknowledge any actions considered as part of the valuation process for a particular year cannot be relied upon for an extended period of time.
“Even though I got a full independent valuation [for property held in my SMSF] 18 months ago, I can’t just simply give that to my auditor and say: ‘Hey, that’s less than three years old, just use that as audit evidence for the market value I’ve used in the accounts,’” he noted.
“No. I and my co-trustee have to turn our minds to [determine] what’s the value of the real estate asset at 30 June 2022.”
According to Ellem, an 18-month-old document in this case was not entirely useless and did form the starting point for the current year’s valuation. However, it needed to be combined with an up-to-date online valuation that incorporated comparable sales in the vicinity in order to satisfy the SMSF audit requirements.
