Valuing your SMSF Assets – 30 June tips

End of financial year has arrived, so now is the time to start thinking about valuing your SMSF investments.

Key questions to consider:

  • Why is a valuation required?
  • What date should the valuation occur?
  • Who can undertake the valuation?

Planning your SMSF asset valuations will help your fund be audit ready.

Why is a valuation required?

Since 7 August 2012 SISA requires investments held in a SMSF to be valued at market value, and for this value to be reflected in the fund’s financial statements on an annual basis.  This requirement relates to all investments, not just real estate.

Annual market valuations of SMSF investments are also required for the purpose of calculating minimum pension limits and in-house assets limits (to measure against the 5% rule).

Subject to the outcome of the upcoming election, market valuations may also potentially affect the amount of contributions an individual can contribute to their SMSF.

What date should the valuation occur?

Market valuations of SMSF assets are required to be carried out on an annual basis on or near to the financial year end date of 30 June.

It is also prudent for trustees to obtain a separate valuation of investments prior to the establishment of a pension.  In an ideal world a pension would start on 1 July, with the prior year audited accounts potentially satisfying the need to value the investment prior to the pension establishment.  However, in reality, this is not always practical and pensions do invariably start at any-time during the year.

Who can undertake the valuation?

To be audit ready, trustees should be determining current market values for investments held in the SMSF. The key requirement is that the valuation must be based upon objective and supportable data. Some assets, such as listed shares are easy to value, however some require more planning and consideration.

For example, objective and supportable data may include valuations by appropriately qualified valuers, market appraisals by real estate agents, online valuation services or a subject expert.  The frequency of the valuation will depend on the circumstances. A recent valuation would be prudent if an event has occurred that may affect the value of the asset since it was last valued. This may, for example, be due to a change in market conditions or significant improvements made to the property.

GETTING AUDIT READY

If you’re not sure how much a particular asset is worth, it is well worth seeking the opinion of a qualified professional with expertise in the asset in question. An independent third party valuation dated on or near 30 June will come in handy at audit time for any asset that is significant to your SMSF.

Want to stay up-to-date?

Stay on trend and in the know when you sign up for our latest content

Subscribe