One issue I come across frequently is the thought process, or lack thereof, when parties are revaluing SMSF assets. You will note that I said parties because it isn’t just trustees that offer creative suggestions about valuations.  I was asked the following by a “party” at a recent presentation. “I’m finalising the 2016/17 return, is it ok to under value the assets to get below the transfer balance cap?”.

This type of question is more common than you’d think. Of course I gave a very statutory answer and directed them to the ATO’s valuation guidelines. The issue is that when it comes to revaluing SMSF assets it’s different horses for different courses. Are you acquiring assets, preparing end of year reports, monitoring in-house assets or disposing assets?

Revaluing SMSF assets

For the vast majority, revaluing SMSF assets is a relatively straight forward process, the software does it for them. But for some the investments held represent non-standard assets or assets not attributable to a common reference point.  It is these assets that are subject to varying degrees of valuation interpretations. In some instances there are different legislative requirements as well, which unfortunately is not uncommon in the world of SIS, hey of course there are two definitions for relatives!

At the base level there is what the market is willing to pay and what someone is willing to sell for. These things require some level of research to see what others have paid but there is no mandated independence. Independent valuations are only a requirement when disposing of collectable and personal use assets to a related party. In that instance the valuer must also be qualified, so we already have some level of precedent. The ATO guidelines make the following point about qualified valuers. A valuer will be qualified either through holding formal valuation qualifications or by being considered to have specific knowledge, experience and judgment by their particular professional community. How relevant will online communities become in determining valuations now and in the future?

Many of us take for granted that when it comes to revaluing SMSF assets people will do the right thing. That’s not always the case and sometimes we need to give people a little push. The first push should be to the ATO’s guidelines for valuing assets Click here.

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