Ron Phipps-Ellis writes an article for the website SMSF Adviser where he talks about the regulations governing valuations of SMSF assets. The rules have changed a lot over the last few years and this warrants that the practitioners keep themselves updated with the latest developments.
Things have changed since August 2012
Before 7th August 2012, SMSF trustees weren’t legally bound to get their fund assets valued at market price. Of course, only if the fund was not paying a pension/starting a new pension/holding an in-house asset. While the trustees were encouraged to utilise the concept of market value, they weren’t legally tied to it.
Fund valuation at market price
Things have changed now. Trustees are expected to get their fund assets valued at market value for the purpose of preparing their financial statement. This is in order to guarantee consistency. McCarroll defines market value as the amount that any willing buyer is likely to pay to procure an asset from a willing seller, keeping a few assumptions in mind. These assumptions are 1) Transaction was conducted keeping arm’s length in mind. 2) Sale succeeded proper marketing efforts. 3) Both the sides conducted themselves knowledgeably.
Owning foreign property
There are many intricacies related to SMSF fund valuation. One such complex area for the practitioners is the event of an SMSF owning foreign property. Procuring valuations in foreign land is not as simple as doing it in Australia. Extra documents are required for the purpose. Such documents try to confirm that there are no encumbrances or encroachments on the property, that the property is sufficiently insured, passes the sole-purpose and the in-house asset test, is in sync with the declared investment strategy (proposed by the trust deed) and is beneficially owned by the fund.
Supportable data and objectivity
McCarroll writes that the fund trustees can undertake valuation till the time they are basing it on supportable data which is objective in nature. While a registered valuer is considered ideal, he or she is in no way mandatory. This said, the SIS Regulation 13.18AA suggests that an independent valuation is mandatory if the fund has disposed off a collectable or an asset of personal use. In all these respects, ATO’s detailed work Valuation Guidelines for Self-managed Superannuation Funds can be a great help, writes McCarroll.
You can read the original article here
There are various aspects of SMSF which need thorough compliance. If you have a question in your mind or you are pondering hard over some compliance issue, feel free to contact me today. I will be glad to ease your mind off the subject.