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SMSF Property Valuations Explained

Tom Welch

Founder & Principal
SMSF property valuation requirements

As trusted Gold Coast SMSF accountants, we’re aware of prevalent misinformation about SMSF property valuation. Many Australians believe it’s a process that must be done every three years. However, the Superannuation Industry Regulations 1994’s Regulation 8.02B emphasises that this is not true, offering investors relief from an earlier misconception.

This blog will enlighten you on the importance of an SMSF property valuation, providing Australians with valuable insight into their long-term investments and helping them prepare for retirement.

Why Should SMSF Property Investments Be Reassessed?

Trustees of self-managed superannuation funds (SMSFs) must reassess their property investments for the following reasons:

Pension

Calculating the accurate minimum and maximum pension amounts requires the precise value of the fundamental investments facilitating the pension. Trustees must determine this value at least one year before they pay off their pensions.

Performance

SMSF property investment performance, which includes rental income and capital growth, is a significant factor in the fund’s growth. A regular ATO SMSF property valuation ensures that the funds represent the current market value, which is critical for determining investment performance.

Market value refers to the amount potential buyers could pay to acquire an asset from a seller. Both parties must act judiciously and knowledgeably during their arm’s length transaction.

Performance

SMSF property investment performance, which includes rental income and capital growth, is a significant factor in the fund’s growth. A regular ATO SMSF property valuation ensures that the funds represent the current market value, which is critical for determining investment performance.

Market value refers to the amount potential buyers could pay to acquire an asset from a seller. Both parties must act judiciously and knowledgeably during their arm’s length transaction.

In-house assets

These assets include loans to and investments in related parties, who can use fund assets that SMSF investors entrusted to them.

The maximum amount an SMSF can invest in in-house assets is 5%. Qualified professionals, such as accountants and certified valuers, must evaluate the fund’s holdings at fair market value to compute the exact ratio.

Contribution caps

As a trusted Gold Coast accounting firm that has assisted numerous customers with their SMSF concerns, we recommend evaluating SMSF assets at their market value to determine an individual’s total superannuation balance.

Non-concessional contribution eligibility hinges on the investor’s total superannuation balance (TSB) amounting to less than $1.7 million after the preceding financial year on 30 June.

SMSF members with a balance lower than $500,000 on 30 June of the previous year can contribute beyond the general concessional contributional cap. Since 2020, the Australian government has allowed subsequent concessional contributions for unused amounts, which can be rolled over up to five years.

When Should Investors Revalue Their SMSF Properties?

The ATO’s Tax Determination TD 2000/29 stipulates that SMSF yearly valuations are mandatory if members continuously contribute to the fund and perhaps start a new pension each year.

In reality, qualified valuators must assess properties at market value yearly on 30 June or at the end of each fiscal year.

Who Can Assess Your SMSF Property?

A reputable, trusted professional independent valuer can determine the market value of property that constitutes a significant portion of your SMSF’s assets. The Superannuation Industry Regulations 1994’s Regulation 8.02B does not require yearly external valuations of real property. However, trustees can do so at their discretion.

Annual statements and account preparations entail the trustees determining whether the external valuation can enhance the fund’s real property value.

Trustees can cancel external valuations if they discover assessment inaccuracies or if the property’s value has changed drastically since the previous appraisal.

Remember that market conditions and natural disasters can cause the property’s value to fluctuate. We recommend that trustees get a new assessment or obtain additional evidence that substantiates the valuation.

Here are other ways of providing market value evidence aside from external evaluations. These include the following:

  • Acquiring an independent assessment from a real estate agent, who will evaluate the property’s market value from the street. This process is known as a kerbside appraisal.
  • Issuing a sales contract for recent purchases provided no significant events have affected the property’s value.
  • Presenting recent comparable property sales information.
  • Supplying a rates notice that supports other appraisal evidence.
  • Providing the net commercial property income yield as proof. Remember that this becomes valid only when the investors provide other evidence and the tenants are unrelated.

A real estate valuer is a certified or licenced individual authorised to assess property according to Australian state or territorial law.

A valuer working on the Gold Coast, Brisbane, or other territory in the state must register with the Values Registration Board of Queensland.

Furthermore, the Australian Property Institute must certify the individual as a Certified Practising Valuer, and the Australian Valuers Institute must verify him as a Certified Professional Valuer.

Relevant institutes that offer valuer certifications include the Certified Practising Valuer (RICS), Chartered Valuation Surveyor (API), and Certified Practising Valuer (AVI).

Remember that the Australian Taxation Office (ATO) recommends a certified independent valuer for SMSF properties if the asset represents a considerable amount of the fund’s value.

A qualified independent valuer is also ideal when the assets’ nature complicates SMSF property valuations.

To summarise, SMSF property valuation every 3 years ATO is not required by the Australian government. Instead, the Superannuation Industry Regulations 1994’s

Regulation 8.02B requires the use of SMSF assets, including real property, at market value when filing the fund’s financial statements and accounts in fiscal years beginning 30 June 2013. .

We’re The Gold Coast’s SMSF Experts

Do you need assistance with SMSF property valuation requirements? TW Accounting understands the significance of precise asset valuations and their repercussions on your fund’s long-term compliance and performance. Our staff knows SMSF compliance can be challenging, so we’re always ready to help.

Our audit specialists offer streamlined solutions to ensure your self-managed super fund adheres to Australian law and performs optimally. Contact us today to discuss your SMSF audit enquiries and requirements.