An SMSF technical specialist has reminded trustees of the requirements for commercial property valuations after noting ongoing confusion about the minimum standards needed to support them.
“[Commercial property valuations] do not need to be done by qualified independent valuers. The standard is objective and supportable evidence. However, what that means in context is a little unusual,” Heffron SMSF specialist Sean Johnston noted during a recent briefing.
“The ATO does have some guidelines on this, but they are guidelines only. What you’re looking for is something that somebody else can replicate. You might need to get vacancy reports, you might need to get square meterage valuation amounts for similar types of property and you will need to get things like comparable sales.
“Where commercial property itself gets a little bit more complex than residential property is that a lot of commercial properties are very unique, even ones that seem quite similar to each other have unique tendencies.
“For example, some of these properties that might be factories or warehouses. You’re going to really struggle to get objective and supportable data that really matches up to the criteria that we need and so you might find for commercial property you will have to get formal valuations slightly more often.”
While Johnston confirmed the ATO does not require a qualified valuer’s report for commercial properties, he noted such evidence is often viewed favourably, although many trustees are reluctant to incur the cost of obtaining one annually.
To that end, he suggested trustees may need to dig a little deeper and seek a broader range of evidence in lieu of a valuer’s report.
“There are a number of people out there now doing things like [CoreLogic] RP data does with residential property and they’re doing that with commercial property,” he said.
“These aren’t necessarily qualified valuers in the same sense, but they do give you some objective and supportable data as long as the [data] is within the parameters that you’ve got to look at. You still might be able to get suburb profile reports and occupancy ratings, it just might be a little bit harder for those commercial properties.
“I don’t think that’s too far of a stretch, but it does mean you as practitioners or your clients as trustees are going to have to do a little bit more work than we’ve done in the past on these commercial property valuations.”
