The annual obligation
Superannuation law requires fund assets to be reported at market value in the fund's financial statements each year. The ATO's position is that the valuation must be based on objective and supportable data, and that a trustee's own opinion is not sufficient on its own.
In practice, auditors want to see evidence that a reasonable, arm's-length figure was reached. For listed shares that is trivial. For a warehouse in Yatala or a unit in Southport it is not, which is why property is the most commonly qualified asset class in SMSF audits.
When a formal valuation is effectively required
Acquisition from a related party
Business real property acquired from a member or related entity must be acquired at market value. This is a compliance requirement, not a preference.
Disposal to a related party
The same discipline applies on the way out — market value must be evidenced.
Property is a large share of fund assets
Where the property dominates the balance sheet, the auditor's materiality threshold makes a formal valuation practically necessary.
Commencing or paying a pension
Pension calculations depend on asset values, so the figure has downstream consequences and needs support.
In-house asset or LRBA arrangements
Limited recourse borrowing and related-party leases attract closer scrutiny of the underlying value.
First year of ownership or after major works
Where the property has materially changed, prior-year figures no longer evidence current value.
What counts as supporting evidence
The ATO accepts a range of evidence, and the appropriate level scales with materiality and risk. At the strongest end is a valuation by a registered valuer. Below that sits evidence such as independent appraisals supported by comparable sales data, or, for some assets in some years, a documented trustee assessment based on objective market data.
The pragmatic approach many accountants take is a full valuation in the years where it matters — acquisition, disposal, pension commencement, material change — with documented supporting evidence in the intervening years. Confirm the approach with your auditor before the year end, not after.
Business real property and related-party leases
Where a fund owns premises leased to a member's business, two values matter: the market value of the property and the market rent. Both must be at arm's length, and both are testable.
Under-renting to a related business is a common and serious compliance problem. We can provide a market rent determination alongside the capital valuation, which gives trustees documented support for the rent actually charged.
Practical timing
The effective date should align with the fund's reporting date — 30 June for most funds. Arrange the valuation close to that date rather than months either side, so the figure sits properly in the financial statements.
Commercial reports take three to seven business days, so instruct in advance of any lodgement deadline. Where several fund properties need valuing, tell us up front; scoping them together is materially cheaper than sequential engagements.