Valuation expectations may rise

Valuations SMSF auditors Division 296 tax

In preparation for the Division 296 tax, SMSF auditors should be requesting sworn valuations for property assets held within a fund.

SMSF auditors may start asking trustees to provide property valuations of a higher standard in order to avoid any unexpected consequences from the proposed Division 296 tax.

Super Sphere director Belinda Aisbett indicated she is likely to request property valuation evidence supplied by a real estate valuer rather than a real estate agent because an inaccurate valuation could expose trustees to a Division 296 tax liability and affect the auditing of the fund.

“I don’t need to tell anybody in the room how problematic asset valuations currently are and I think it’s only going to get worse as we head into the $3 million cap,” Aisbett told delegates at the SMSF Association National Conference 2024 in Brisbane today.

“We’re saying to some of our clients who might be looking like they’ll hit the $3 million cap and they’ve got a property that might be a little challenging to value, we think you should start considering sworn valuations so that you actually have an accurate starting position for these new measures.

“The last thing you want is for a client to just be a nudge over the $3 million cap and then they get a valuation and their property is worth $4.5 million.

“If they [had] got the sworn valuation when the measure [was] introduced and the sworn value of their property is $4 million, you can clearly see you’ve only got half a million unrealised change in that market value versus $1.5 million.”

She stressed the importance of fund members prioritising accuracy in property valuations to prevent future problems and suggested sworn valuations are the simplest approach to doing so.

“I’m saying to clients, it would be a whole lot easier if you start to get your heads around getting sworn valuations. I respect that they cost money, but it may be money very well spent when you think about the consequences of not having accurate figures in the financials,” she noted.

“Of course, if you’ve got a sworn valuation, it’s very easy for me, as the auditor, to say I have sufficient appropriate audit evidence [because] that’s the [highest] quality property valuation evidence you can have.

“I know it’s a few years away now, but as an auditor, I really think you need to start planting the seed now.”

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