Do you have a Self Managed Superannuation Fund (commonly known as a SMSF)? Have you ever wondered what value your assets should be recorded at for End of Year reporting? Don’t worry – there are many others in the same boat as you.
Until recently, despite the ATO’s preference for all assets to be shown at market value, it was not law and trustees of most SMSF’s were able to choose either market value, or original cost. Also, there have been differences with the methods that trustees have chosen to determine market value, mainly with ‘real’ property – using the accepted practice of obtaining market values every 3 years.
Pay attention – this is all set to change. The government has now passed laws to amend the SIS Act (the law which governs SMSF’s) to make it mandatory for assets to be valued at market value for the 2013 and subsequent Financial Years – and not only at year end!
So what does this mean for you?
Possibly not much – as it’s reported that 72% of all SMSF assets are ‘market assets’. This means that the market values of these assets (primarily assets such as shares, managed funds, bank accounts) are readily available for little or no cost.
I can hear you saying, “But my SMSF holds property – does that mean I have to get an annual valuation? This will end up costing me (and my fund) a small fortune!”
Believe me, I hear your concerns.
But don’t stress – you don’t need an annual valuation by a professional. The ATO have determined that it is still okay to use the accepted practice of obtaining market value every 3 years, as long as you do have the market value and not the original cost. They even say that valuations do not need to be performed by a qualified person, as long as the valuation has objective & supportable data.
This means that you don’t have to rely on a valuer to give you a market value of your property. It can be done by a real estate agent, a property investor, or even by yourself using online tools, provided you have the evidence to support your value. However, most auditors of SMSF’s would prefer someone within the industry (valuer or real estate agent) providing this value and I would see this as a prudent approach to take.
To help with the implementation of the new laws, the ATO have released a document called ‘Valuation guidelines for self-managed superannuation funds’. It is quite a handy document to view online, and could help you to identify when you need to use market values, and who can determine them for you. It also covers other non-market assets – such as collectables and personal use assets not covered in this article.
You must remember however, this document is not a be all and end all. It is always wise to check with your financial advisors – your accountant or your SMSF auditor – to ensure that you fulfil your requirements as trustees.
Until next time – happy super fund-ing!