An SMSF auditor has highlighted the difficulty of SMSFs owning niche assets that produce income, but are hard to value or where information is scarce, noting these circumstances leave little choice but to flag the asset each year with the ATO.
Tactical Super director Deanne Firth gave the warning during a presentation at the recent Auditors Institute Auditors Day 2025 in Melbourne when asked about how to value a racehorse owned by an SMSF that was part of a syndicate.
“Getting a valuation for a horse held by a syndicate is going to be one of your biggest issues, but there are going to be more problems as well,” Firth said.
“So, obviously you are going to have to lodge an auditor contravention report in that year and every year in regards to the valuation.
“You also have to look at the syndicate terms because who is paying for the food and upkeep and how are those things accounted for?
“The winnings may reflect the price and value of the horse and there is kind of a formula about that, but I don’t know if it will be objective and supportable.
“I used to work on a horse stud that bred racehorses and there is some information available for racehorses because they auction them.
“So they could find some data, but there is a lot of variables, such as the age of the horse, the number of races it has run, where the races were held and how the horse placed, but it’s going to be difficult for them to provide that annually to you.”
She stated she would have told the SMSF trustees to avoid the horse as an investment because it also raised issues around the sole purpose test and personal benefit from assets prior to retirement.
“Does their ownership via an SMSF mean every time they go into the member’s enclosure [at a race] when their horse runs with the other owners, they have to stop at the door [as that may be a present-day benefit]?” she said.
