Asset valuation errors have long-term effect

An inaccurate valuation of an asset is an issue that extends beyond a note in an auditor’s report and can lead to the cessation of a pension that can only be overturned by revaluing the asset and the income stream, Smarter SMSF chief executive and co-founder Aaron Dunn has pointed out.

Speaking at the recent ASF Audits Technical Summit 2026 in Adelaide, Dunn said in an SMSF where a member is drawing a retirement income stream, a number of things will fail where an asset is undervalued, with the minimum pension payment being a key concern for that person.

He gave the example where business real property held in an SMSF was undervalued by $400,000 and this was not addressed until flagged by the fund’s auditor in March, prior to the lodgement of the fund’s annual return.

“The understatement [of the value] means if we have already communicated from the financial statements to the client about the ongoing pension obligation, at this point in time we have a revised minimum pension we’re going to have to go back to and look at,” he said.

“That’s not to say we’re going to end up where the exempt current pension income (ECPI) for that subsequent year is out of kilter or the minimum pension won’t be satisfied. Rather it highlights if we go back and make adjustments to accounts, we are going to have to work our way through and identify the potential holes we now have in the work that was previously done.

“The fact the property is understated means if we had done some work around what the minimum pension may have been set at on 1 July, it will need to be reset to ensure the minimum pension obligation is done.

“We can fix that before 30 June, but if we don’t, we have the impact that if the pension is lost and we can’t use the administration concession, then until that pension has been reset, there would be no ability to claim ECPI, not only in respect to the year in question, but in respect to those subsequent years as well.”