Why is my auditor always asking me to re-evaluate SMSF assets?

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At some level, this is important because so many tax rules depend on reporting a fair value of a member’s retirement pension balance, which requires the trustee to place a real value on all assets. fund. For example, the exact amount a member has in the super may dictate how much he can contribute to the super, how much he might have to withdraw from his pension each year, how much of his fund can be converted into a ‘phase’ pension. retirement ”and Continued.

Unsurprisingly, the ATO always strives to ensure that SMSF cannot extract more tax benefits than they should from the pension tax rules. Thus, the ATO cares deeply about ensuring that SMSF do not underestimate their members’ account balances.

While many rules requiring SMSF trustees to place a present value on their assets have been around for some time, some funds have been slow to respond.

Long-standing practice

Not that long ago, it was quite common to only see real estate investments revalued every three years. Even then, there was no specific rule stating that triennial evaluations were acceptable. There was simply a long-standing industry practice of assuming that property values ​​don’t change quickly, and therefore getting a new appraisal every three years was “probably close enough.” Nowadays, this argument is rarely accepted by auditors and certainly not by the ATO. (In fact, anyone trying to buy their first property in one of our big cities would probably laugh at the very idea.)

In the case of assets that do not have readily available value, trustees are technically allowed to determine the value themselves if they believe they have the expertise to do so. The property is another good example. In the past, an auditor may have simply accepted a statement from the trustee stating the property’s value or that the value had not changed in the past 12 months. Nowadays, they would expect these statements to be supported by external evidence.

Likewise, other professionals such as real estate agents are under much greater pressure to back up their valuations with evidence – for example, data on sales of comparable properties, a well-argued position on why this particular property might be considered different, et cetera.

Auditors also take a closer look at investments of funds such as private companies or mutual funds that own something else – for example, cases where SMSF owns shares in a mutual fund but the trust owns property. .

Gone are the days when an auditor simply accepted signed accounts from the mutual fund, which most likely valued the property at its purchase price. This may be the case because there is no legal or tax obligation for an open-ended investment trust to update the value of its assets each year; it is something that is unique to pension funds.

Really appreciated

Now, an auditor would expect the trustee to confirm that the underlying assets of the trust are truly valued at market levels and, if not, to provide another valuation.

Finally, it is not just a June 30 issue, even if the preparation of year-end financial accounts is often a lever to obtain updated values. It is also very relevant when important events occur during the year, such as the start of a pension or the payment of a lump sum from a participant’s “capitalization account” (an account that has not been transformed into a pension). In either case, there are tax rules that make it important to accurately calculate the value of the member’s account. This will result in careful scrutiny of the values ​​placed on the fund’s assets at the time.

So don’t be surprised if auditors pay much more attention to asset value than before. They have a good reason and it is much better to argue with the listener than to wait for the ATO to strike.


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