Auditing, Compliance, SMSF

Beware of altered valuations

SMSF auditor asset valuation market value $3 million superannuation earnings tax

SMSF auditors should exercise some scepticism regarding asset valuations in 2024 as trustees may be attempting to escape the impacts of the $3 million soft cap tax.

SMSF auditors are likely to see an increase in inaccurate asset valuations submitted by their clients in 2024 as trustees may be preparing to mitigate the impacts of the additional earnings tax on superannuation balances over $3 million.

ASF Audits head of education Shelley Banton emphasised the need for auditors to be vigilant in determining whether assets have been correctly assessed at market value as individuals aware of potential future tax liabilities are likely to take steps to offset the impact as early as next year.

“There’s going to be a lot of funds who’ll be tinkering around that $3 million edge as we get closer towards 2026. It’s going to be the difference between paying that super tax or not, which means it all comes down to market value,” Banton told attendees of a webinar yesterday.

“The question here is are trustees going to wait until 2026 to try and put pressure on market values. Obviously, [I’m not including] listed shares here, but it’s basically those more complex assets like property and unlisted entities. They’ve always been much more difficult to value.

“[This] makes me think that our job as auditors just got a little bit harder this year because the values might start getting adjusted so that they don’t look like outliers as we get closer to 2026.”

She noted trustees looking to work their way around the tax are likely to be caught out as the ATO is employing technological solutions to identify discrepancies in valuations.

“The ATO is currently following up on some 1200 auditors who signed off on asset values that didn’t change over the last three years. They [were also] able to identify members through these data-matching capabilities who were taking out money during COVID in real time,” she said.

“We can see that these sophisticated data-matching algorithms are being used and implemented to analyse information from a lot of different sources, which includes tax returns, financial institutions and third-party data providers.

“So you need to be aware that this is a [focus area] that will be looked at in the lead-up to 2026.”

Despite the imposition of the tax, trustees are still bound by the Superannuation Industry (Supervision) Regulations when submitting asset valuations for audit.

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