A guide to SMSF Property Valuations

An SMSF property valuation is essential when creating annual SMSF financial reports. It’s there to confirm if your SMSF follows superannuation fund laws. The asset valuation also affects the returns for members and overall SMSF sector performance. As a fund member, you must provide evidence and documents supporting the valuation of your property.  

What is an SMSF property valuation? 

SMSF property valuation is used to determine the value of a real estate property. This ensures that the property is valued appropriately and reflects a fair market price. A comprehensive valuation must have the following components: 

• Clear description of the property (i.e., location, amenities, and other features that could affect its worth). 
• Date of the valuation specifying the market value of the property at that time. 
• Current market value of the property. The valuer must provide sufficient evidence to support the market value through recent sales data or expert assessment. 
• Comparable properties are used to determine the market value of the SMSF property. 
• Estimated market rental income of the property for commercial properties. 

Both residential and commercial properties must undergo an SMSF property valuation before it can be purchased by the super fund. For those who already own SMSF property, a property valuation must be conducted annually for SMSF audits and reports. Having an accurate and updated valuation for all SMSF property is a must. 

If the SMSF property purchase was recent, the amount paid in an arm’s length market should also be included in the valuation report. 

General valuation principles for real property 

An SMSF property valuation must be done in good faith. For a valuation to be fair and reasonable, it should consider all relevant factors and aspects that could affect the SMSF property’s market value. The SMSF property valuation must follow these principles: 

• The property valuation uses a rational, reasoned, and methodological process. 
• The property valuation can be explained to a third party. 
• The property valuation must be done by a qualified independent valuer. 

Usually, property valuations must be substantiated by objective and portable data. Property valuation can be conducted by reputable providers like online services, real estate agents, and the like.  

SMSF property valuation methods 

An SMSF property valuation can be conducted by professional property valuers, real estate agents, online services, or those who are qualified and experienced in property valuation. The valuer must not be at all affiliated with the SMSF fund or related party. An SMSF property valuer should be an impartial and unbiased party. 

A property valuation is valid as long as the valuer has the appropriate qualifications, and the valuation is based on objective and supportable data. 

How often should SMSF properties be valued? 

Current ATO guidelines state that SMSF properties should be valued every financial year. SMSF trustees should value all assets related to the fund every finance year when passing the super fund’s financial statements. Documenting the valuation process is vital for compliance.  

If there have been any substantial shifts in the SMSF property’s market price, a property valuation must be done sooner. This is true in cases where major renovations have been made. An SMSF property valuation should also be done if there are substantial changes in the local real estate market.  

Australian Tax Office (ATO) SMSF property valuation requirements 

When valuing commercial and residential property, SMSF trustees and auditors must follow the rules set by the ATO. In order to stay compliant, you must: 

• Conduct yearly valuations on your SMSF property. As mentioned earlier, you need to make annual property valuations in line with the SIS Regulation 8.02. A formal property valuation report is not required every year. However, the market value of the property should be stated. Backing documents to support the claim which could include formal independent valuations. 
• Provide objective and supportable data. You can’t make claims about the property’s reported market value without the evidence to back it up. A single report from a real estate agent, for instance, is insufficient. You need to confirm the findings by providing the objective methodology used, comparable sales, market analysis, and the like. 
• Submit written reports by qualified professionals. The SMSF property valuation documents must be written by qualified valuers or professionals with expertise in property valuations. The documentation must detail how the property valuation came to be. It needs to have the valuation approach, calculations, inputs, outcomes, and other relevant information. 

As an SMSF trustee or member, you need to make sure you follow the ATO guidelines closely. Not conducting SMSF property valuations in a timely manner could trigger an ATO compliance review.  

Always make sure the valuation is done properly and by a qualified professional, there is ample documentation, and the assessment provides a fair market price for the property. Otherwise, you could face non-compliance or be subject to ATO queries and scrutiny.  

Ready to buy an SMSF property? 

Knowing the SMSF property valuation requirements and rules makes buying an SMSF property a bit easier. Whether you’re buying a residential SMSF property or a commercial one, loans.com.au can help you get the best deal on your investment loan. Get in touch with our friendly lending specialists today by calling 13 10 90 or scheduling an appointment. 

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