It has an impact on the returns for members and ultimately, SMSF sector performance.
A valuation of assets is required to confirm your SMSF has complied with relevant super laws for:
- preparing the financial accounts and statements of the fund
- acquiring assets between SMSFs and related parties
- investments made and maintained on an arm's-length basis
- disposing of certain collectables and personal use assets to a related party of the fund
- determining the market value of an SMSF's in-house assets as a percentage of all assets in the fund
- determining the value of assets that support a member's super pension
- determining the value of existing retirement income streams at 1 July 2017 as they will be counted towards the transfer balance cap
- determining the value of new retirement income streams on or after 1 July 2017, when they will be counted towards the transfer balance cap
- determining the market value of assets that are eligible for transitional capital gains tax (CGT) relief in the 2016–17 income year
- determining the market value of assets supporting members' retirement phase and accumulation accounts for the purposes of calculating the members' total super balances
- managing your fund’s investments in the best financial interests of fund members.
Summary of valuation requirements
|
Event |
Requirement |
|---|---|
|
Preparing the SMSF financial accounts and statements |
An asset must be valued at its market value. The valuation should be based on objective and supportable data. |
|
Collectables and personal use assets – acquired on or after 1 July 2011 Transfer or sale to a related party |
Must be valued at market price as determined by a qualified independent valuer. |
|
Collectables and personal use assets – acquired before 1 July 2011 Transfer or sale to a related party |
For the period 1 July 2011 to 30 June 2016, transfers to related parties do not require valuation by a qualified independent valuer. However, these transfers should be made at an arm's length price that is based on objective and supportable data. From 1 July 2016, transfers to related party must be made at a market price determined by a qualified independent valuer. |
|
Transfers between SMSFs and related parties (subject to collectables and personal use asset rules above) |
Acquisitions of permitted assets must be made at market value. A valuation is not required when an asset is disposed of to a related party however it must occur on an arm's length basis. |
|
Transfers between SMSFs and unrelated parties |
A valuation is not required however the transfer must occur on an arm's length basis. |
|
Determining the value of assets that support a super pension This includes for calculating amounts that count towards the transfer balance cap |
The market value of the account balance needs to be determined on the day the pension commences or moves into retirement phase or, for ongoing pensions, on 1 July of the financial year in which the pension is paid. The valuation should be based on objective and supportable data. In some circumstances a reasonable estimate may need to be made. |
|
Testing whether the market value of the SMSF's in-house assets exceed 5% of the value of total assets held by the fund |
The value of a fund's total assets needs to be determined on 30 June of the financial year that the in-house assets are held. The valuation should be based on objective and supportable data. |
|
Determining the market value of assets that are eligible for transitional CGT relief in the 2016–17 income year |
The assets' market values need to be determined on the date that their cost bases are reset. The valuation should be based on objective and supportable data. |
|
Determining the market value of assets supporting members' retirement phase and accumulation accounts for the purposes of calculating the members' total super balances |
The value of these accounts needs to be determined on 30 June each financial year, as the total super balance is calculated at this time for a number of purposes. The valuation should be based on objective and supportable data. |
Asset valuation and the annual SMSF audit
Approved SMSF auditors are responsible for checking the valuation of fund assets as part of the annual SMSF audit. This includes making sure that:
- you have valued all fund assets at 'market value' when preparing the fund's accounts and statements
- the valuation is based on objective and supportable data.
The role of your auditor is not to value fund assets, or to determine their market value. Their role is to apply their professional judgment in:
- checking that assets have been valued correctly
- assessing and documenting whether the basis for the valuation is appropriate given the nature of the asset.
It's your responsibility to provide objective and supportable evidence to your auditor to support the valuation of a fund asset. This includes providing all relevant documents specifically requested by your auditor.