Need for asset valuation in the SMSF

Asset valuation is a key component in preparing meaningful SMSF financial reports. It has an impact on the returns for members and ultimately, SMSF sector performance as a whole.

A valuation of assets is required to confirm your SMSF has complied with relevant super laws for:

• preparing the financial accounts and statements of the fund
• acquiring assets between SMSFs and related parties
• investments made and maintained on an arm’s-length basis
• disposing of certain collectables and personal use assets to a related party of the fund
• determining the market value of an SMSF’s in-house assets as a percentage of all assets in the fund
• determining the value of assets that support a member’s super pension
• determining the value of existing retirement income streams at 1 July 2017 as they will be counted towards the transfer balance cap
• determining the value of new retirement income streams on or after 1 July 2017, when they will be counted towards the transfer balance cap
• determining the market value of assets that are eligible for transitional capital gains tax (CGT) relief in the 2016–17 income year
• determining the market value of assets supporting members’ retirement phase and accumulation accounts for the purposes of calculating the members’ total super balances.

Asset valuation and the annual SMSF audit

Approved SMSF auditors are responsible for checking the valuation of fund assets as part of the annual SMSF audit. This includes making sure that:

• you have valued all fund assets at ‘market value’ when preparing the fund’s accounts and statements
• the valuation is based on objective and supportable data.

The role of your auditor is not to value fund assets, or to determine their market value. Their role is to:

• check that assets have been valued correctly
• assess and document whether the basis for the valuation is appropriate given the nature of the asset.

In accordance with these guidelines, it is your responsibility to provide objective and supportable evidence to your auditor to support the valuation of a fund asset. This includes providing all relevant documents specifically requested by your auditor.

If you have any questions, feel free to ask them in the comment section. We will be happy to answer all your queries.