SMSF Property Valuation: What the ATO Requires

The obligation itself is short. SMSF trustees are required to value all fund assets at market value when they prepare the fund's financial accounts and statements. Every asset. Every year. It has applied since the 2012-13 income year, and it sits in regulation 8.02B of the Superannuation Industry (Supervision) Regulations 1994.

Nothing has to happen during the year for it to bite. No sale, no purchase, no new member. The audit runs anyway, because an SMSF audit is required even if no contributions or payments were made in the financial year.

Then the date. The market value of assets supporting members' retirement phase and accumulation accounts on 30 June each financial year is what allows individual total super balances to be worked out. For property, the ATO tells auditors the evidence should support a market value as close as possible to 30 June, and that this matters most where the market is potentially volatile. So a figure that describes a quiet afternoon in March is answering a slightly different question.

The same number then gets reused. The ATO says a valuation is required to confirm a fund has complied with the super laws when it prepares the accounts and statements, when it acquires an asset between the fund and a related party, when it makes and maintains investments on an arm's length basis, and when it works out in-house assets as a percentage of everything the fund holds. Pension payment rules and total super balances lean on it as well.

That in-house asset line has a mechanism behind it worth knowing. If a fund holds an in-house asset, the value of all assets has to be determined at the end of the income year, because the valuation is what lets a trustee see whether the market value of in-house assets has gone past 5% of the fund's total assets. Both sides of that ratio are market values, so a property number can decide a compliance question that isn't really about the property. The cap itself, what counts as an in-house asset and the written plan that follows a breach are set out on our SMSF commercial property page.

And there's a clock on the audit. An approved SMSF auditor has to be appointed no later than 45 days before the fund's annual return is due, and the audit has to be finished before that return is lodged.

The two sit one word apart, which is how the mix-up happens. The ATO's own list of relevant factors for valuing real property includes an appraisal from an independent real estate agent. Agencies hand appraisals out all the time. Read the list quickly and it looks like the page on the kitchen table is the thing the fund needs.

It isn't. A real estate agent's appraisal of what your property might sell or rent for is not an SMSF valuation. The ATO says an agent appraisal on its own, without the comparable sales it's based on, generally isn't enough evidence for your fund's accounts. FAA doesn't provide SMSF valuations. Nothing on this page, or anywhere else on this site, is an offer to.

The ATO puts it more precisely when it's writing to auditors. Real estate agent appraisals stating what a property is likely to sell for based on sales in the area, without listing details of those sales, would generally not on their own be sufficient appropriate evidence. Note the two conditions attached to the agent item in the trustee guide as well: the agent has to be independent, and where an appraisal or online report is the only evidence being relied on, it should specify the supportable data, for example listing the comparable sales behind it.

So an appraisal can be one input among several, on the ATO's terms and with its workings shown. Producing one for a fund's accounts still isn't something FAA does. Whether a particular document does that job for a particular fund is a question for the fund's own accountant and its approved SMSF auditor, and for a valuer the trustee engages directly if they want one.

The phrase gets used as though everyone already agrees on what it means. Same two words, doing different work each time: the price on a purchase between the fund and a related party, and the number sitting in the fund's accounts at year end.

The superannuation legislation defines market value as the amount a willing buyer could reasonably be expected to pay to acquire the asset from a willing seller. Assumptions come with it: that buyer and seller dealt with each other at arm's length in relation to the sale, that the sale happened after proper marketing of the asset, and that both acted knowledgeably and prudentially.

The ATO then sets a standard for how you get there. A trustee must be able to demonstrate that the valuation came from a fair and reasonable process. Generally that means all five of these hold: it's based on objective and supportable data, it considers all relevant factors and considerations likely to affect the value of the asset, it was undertaken in good faith, it uses a rational and logical process, and it's capable of explanation to a third party.

That last condition is the practical one. Capable of explanation to a third party, and the third party is usually the auditor. Which is why the working matters more than the confidence behind the figure. Your accountant is the person to walk that working through with.

That one catches people by surprise. For the purposes of preparing the fund's accounts and statements, a trustee is not required to obtain a valuation by a qualified independent valuer.

A recommendation comes attached to it. The ATO says to consider using one where the value of a fund asset represents a significant proportion of the fund's value, or where the nature of the asset means the valuation is likely to be complex or difficult. For a fund whose main asset is a property, that first test is the live one.

Depending on the situation, the ATO says a valuation may be done by a registered valuer, a professional valuation service provider, a member of a recognised professional valuation body, or a person without formal valuation qualifications who has specific experience or knowledge in a particular area. Whoever does it must also be independent: not a member of the fund, not a related party such as a relative, and not influenced or appearing to be influenced by others.

The law only compels a qualified independent valuer in a narrow case, and it isn't property. It applies to collectables and personal use assets disposed of to a related party, from 1 July 2011 for those acquired on or after 1 July 2011, and from 1 July 2016 for those acquired before 1 July 2011 and disposed of to a related party after 30 June 2016.

So for a property the decision is the trustee's judgment against those two tests, made with the fund's own accountant. Not compelled is a different thing from not needed, and the ATO's guide only says the first one.

It's one of the things people search for right next to this topic, and the idea has a certain logic to it. A valuation feels like a big piece of work, and big pieces of work feel occasional rather than annual. The ATO's guide doesn't set a cycle like that.

The current guide splits the question in two, and the halves are easy to run together. Valuing is annual: all fund assets, at market value, every year for the accounts and statements. Commissioning a qualified independent valuer is not. If you choose to get a valuation from one, you don't need a new one from them each year.

Four conditions travel with that. You must still consider whether the previous valuation can be used to support this year's value, assess whether it's still appropriate, document how you reached that conclusion, and support the current year's market value with other objective and supportable data. If a valuation has become materially inaccurate, or the value has changed significantly since it was last valued, stop relying on it and get a new one or use other forms of evidence.

Some events force the question early. The ATO names a natural disaster, a global pandemic, macroeconomic events, market volatility and changes to the character of the asset. After one of those, while you're preparing the accounts and statements, you should get a new valuation, use a valuation obtained after the event, or get alternative evidence to support the value.

The honest answer to how often, then: the valuing is annual, the valuer isn't necessarily. Whether last year's report still holds this year is a call for your accountant, on your fund's facts, with the reasoning written down.

The ATO publishes what may count for real property, and it reads as a list rather than a single answer. Relevant factors include the value of similar properties and recent comparable sales results, the amount paid for the property in an arm's length market where the purchase was recent and nothing has materially affected its value since, an appraisal from an independent real estate agent, whether the property has been improved since it was last valued, and net income yields for commercial property, which aren't sufficient evidence on their own and are only appropriate where tenants are unrelated.

The auditor-facing version overlaps and adds one. Independent appraisals from a real estate agent or kerbside, a contract of sale where the purchase is recent and nothing since has materially affected value, recent comparable sales results, a rates notice if it's consistent with the other valuation evidence, and the net income yield of commercial property on the same qualification.

Unless the property was recently purchased by the fund, the trustee should consider a variety of sources, because generally it isn't sufficient for a valuation to be based on only one item of evidence in that list. A valuation done by a property valuation service provider, including an online service or a real estate agent, is acceptable, and where it's the sole source being relied on it should specify the supportable data, for example listing the comparable sales it relied on.

And the evidence has to speak to the right day. It should support a market value for the property as close as possible to 30 June, which the ATO says is especially important where the market is potentially volatile.

Sufficiency itself is the auditor's professional judgment, formed on the fund's own facts under Auditing Standard ASA 500 Audit Evidence, so no web page can settle it in advance. A list like this belongs in front of a superannuation professional: the fund's accountant, and the approved SMSF auditor who'll ask for the documents.

The ATO tells auditors plainly that it isn't their role to value fund assets or to determine the market value of assets. Their job is to form an opinion about whether the fund's assets have been reported at market value in its financial statements and accounts, and to obtain sufficient appropriate evidence to support that opinion for each asset, under Auditing Standard ASA 500 Audit Evidence.

The trustee's job is the other half: value the assets, make sure the valuation is based on objective and supportable data, keep evidence of how it was determined, and give that evidence to the auditor at audit time. The duty to provide it sits in section 35C(2) of the SISA, and where the auditor asks for more information, you have 14 days. An approved SMSF auditor can also seek an independent valuation of the fund's investments as part of the audit and assurance engagement. They have to be independent of the fund themselves, which means no financial interest in it and no close personal or business relationship with members or trustees.

Where an auditor can't obtain sufficient appropriate evidence, the ATO says they must consider modifying the SMSF independent auditor's report, and must lodge an auditor contravention report when the reporting criteria are met. If they can't accurately determine the value of a regulation 8.02B contravention, they can report the asset value recorded in the fund's financial statements as the maximum value of that contravention. Where an ACR is lodged and the contravention hasn't been rectified, the ATO sends the trustee correspondence, which may include asking them to rectify it. Ending the engagement doesn't stop any of that: the auditor must report certain contraventions even if the trustee terminated them or the audit wasn't finished.

The ATO also states its own posture. It will generally accept a trustee's valuation where it doesn't conflict with the guide or its market valuation guidance, where there's no evidence a different value was used for the corresponding capital gains tax event, and where it was based on objective and supportable data. If it concludes the most appropriate valuation method wasn't used, the valuation isn't accepted and the most appropriate method is applied to determine the value instead. It may review a valuation during its compliance processes, and ask for evidence and documentation of the method used.

Read together, those two paragraphs move the job. What the exercise asks for is a number somebody else can follow, with the paperwork sitting behind it, ready for the person whose whole role is to test it.

FAA Property Pty Ltd is a licensed Queensland real estate agency, Office of Fair Trading licence 4220395, current to 5 June 2027, and that number is checkable on the OFT register. One office: Suite 3-7, Level 5, Tower 2, 55 Plaza Parade, Maroochydore QLD 4558, phone (07) 5327 3469, email property@faa.net.au. No branch anywhere else.

A real estate agent licence is not a valuation credential, and it isn't what the ATO means by a qualified independent valuer. FAA performs no valuations of any kind. Not for a fund's accounts, not for an audit, not for a market value at 30 June, and not as a second opinion on somebody else's figure.

What FAA does do is residential, and it happens before a fund owns anything. It sources new-build, house-and-land and off-market investment property across South East Queensland, models what a purchase would cost, connects clients with specialist SMSF accountants and solicitors, and manages residential rental property on the Sunshine Coast from that one office. Four things, and it's worth being exact about where each of them sits relative to this page.

Sourcing residential investment property sits at the other end of the timeline from everything above. Sourcing happens before a fund owns an asset; valuing happens every year after it does. What FAA sources is residential, and buying well is a different question from proving a market value at 30 June.

Modelling what a purchase would cost is about costs, not market value. A cost model looks forward at what an investment property would take to hold, and it isn't evidence of an asset's market value for a fund's accounts. Nothing in it goes to an auditor.

Introductions are where the judgment calls go. Every one of them on this page belongs to somebody else: whether the evidence is enough, whether last year's valuation still supports this year's number, whether a qualified independent valuer is worth engaging. FAA introduces clients to specialist SMSF accountants and solicitors, and stops there.

Property management is residential rentals on the Sunshine Coast, all run from the single Maroochydore office. Worth separating two numbers that get confused: the rent under a lease is a fact about a tenancy, and net income yield is only a factor for commercial property, and not sufficient on its own even there.

FAA also isn't a buyer's agent, a financial adviser, a tax adviser or an SMSF compliance adviser. The ATO says its own guide isn't a full handbook on valuations and doesn't remove a trustee's responsibility to manage the fund's investments prudently and in the best financial interests of all members, and it tells readers to get advice and assistance from a superannuation professional where they're unsure of their obligations. That instruction applies to this page with more force, not less.

Independence turns up twice on this page: once as the ATO's test for a valuer, once as the ATO's test for an auditor. A valuer shouldn't be a member of the fund or a related party such as a relative, and shouldn't be influenced or appear to be influenced by others. So here is how FAA is paid, in its published wording:

FAA Property earns a commission from builders and developers when a property purchase proceeds. The strategy session itself costs you nothing. Because we're paid by the supply side, you should weigh our recommendations with that in mind.

Read that as disclosure. It's a reason FAA sits outside the valuation question rather than inside it. No FAA entity holds its own AFSL, and financial advice sits with other FAA Group companies, which are corporate authorised representatives of Lifespan Financial Planning Pty Ltd, AFSL 229892. FAA doesn't lend money.

This page can't tell you what your own fund should do, and it isn't trying to. The next step after a page like this one belongs to a superannuation professional: your own accountant, and the approved SMSF auditor who'll test the evidence you hand over. If what you're weighing is a residential investment property purchase, that part FAA can help with. Book an SMSF Property Strategy Call and you'll get FAA's piece of it, which is residential investment property sourced across South East Queensland, the costs modelled before anyone commits, and introductions to specialist SMSF accountants and solicitors. The session costs you nothing, and the paragraph above says who does pay. Valuing what your fund already owns isn't part of it.