ATO, Compliance, Investments, SMSF

Unchanged asset values on notice

SMSF annual return Asset values Auditors ATO Contravention reports

The ATO will be paying particular attention to SMSFs that continue to report unchanged asset values and will be focusing on annual returns to be lodged later this year.

SMSF trustees should accurately report changes in the value of assets held by their fund as the ATO will be checking they have done so as part of the lodgement of this year’s SMSF annual returns (SAR).

Heffron SMSF technical and education services director Leigh Mansell said after identifying more than 16,000 SMSFs where values were unchanged over a three-year period, the ATO will review the SARs of those funds and trustees must ensure their financial reporting is accurate by the 31 October deadline for lodging returns.

“If you received one of these letters, then you potentially have a problem. The ATO is worried that trustees are not valuing their assets to market at the end of each financial year and the particular asset classes that were targeted were residential and commercial property, unlisted shares and unlisted trusts,” Mansell said during a recent online adviser briefing.

“What should you do if you have a fund that received one of those letters? Essentially the trustee of that fund is on notice and the ATO have said they’re going to be monitoring the fund’s next SMSF annual return.

“Trustees need to make sure that the assets are reported at market value when they’re next preparing their fund’s financial statements and make sure they’ve got objective and supportable evidence to justify the values that have been used.

“If the values don’t change in the next return that is lodged, it may be that the ATO then reviews that fund to try and work out what’s going on. It may be perfectly okay, maybe the valuation of these assets hasn’t changed, but the ATO is going to be looking for evidence of that.”

She also noted no contravention reports had been issued to funds failing to report unchanged asset values over the past three years, indicating SMSF auditors were also likely to face scrutiny as a part of the program.

“From an auditor’s perspective, you need to make sure that the trustee is providing you with the objective and supportable evidence that you need to justify the valuations that have been used in those financial statements,” she said.

“If the evidence doesn’t support those asset valuations, then you need to think about whether you should be qualifying and is it a part A qualification, a part B qualification or possibly a reg 8.02B qualification.

“Does it necessitate an auditor contravention report? If there is one asset that makes up most of the balances of the fund, and you’re worried about that particular asset value, are you actually disclaiming your opinion in relation to that particular fund?”


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