SMSF trustees that have adopted a consistent approach to valuing a property asset within their fund should have solid reasons why they have departed from that approach to avoid the change being addressed and flagged by their auditor, a technical specialist has pointed out.
MLC Tech Connect senior technical services manager Julie Steed said while it was not possible to get an exact valuation on a property until the day it is actually sold, trustees that value within a range must use the same method each year unless there are provable reasons for any variation.
“Valuations within a range fascinate me; if I get a range, why pick the midpoint?” Steed said at the ASF Audits Technical Seminar 2025 held recently in Melbourne.
“One of the things I have seen is trustees who have a good history of picking the midpoint and then one year when the valuation increases and becomes a bit of an issue, they pick the lower point.
“We have to be consistent because this is a type of thing that your auditor will want a demonstration of evidence. If you always pick the midpoint, is that the best point?
“Are there things about your property that might give it a higher value or a lower value in that year?”
She pointed out that during the COVID-19 pandemic of 2020, many homes in South Australia saw an increase in rates notices, which was in turn based on improved land value, and these documents are used by SMSFs as supporting evidence for a property valuation.
“The valuation of my home increased by $40,000 and there was no way my home was worth that much more, so I rang the Valuer-General who said the value was based on recent, similar sales, but I pointed out those properties had recently renovated bathrooms or kitchens,” she said.
“I still have my original 1970s kitchen and bathroom, sent a couple of photos and they came back and said they would drop the valuation back because I could produce supporting documentation.”
She added this approach could be applied to a property asset in an SMSF and trustees also may be able to use council valuations instead.
“In states where property value is based on your council valuation, that can be a good piece of evidence, and in South Australia, historically, the council valuation was lower than what your actual valuation was,” she said.
