The short answer
Your self-managed super fund needs to report its property at market value every year. That does not always mean paying for a new certified valuation every year. The ATO's general position is that the value must be based on objective and supportable data, and in many years that can be done without an external valuer. However, there are times when an independent valuation is expected or clearly the better choice, and your SMSF auditor may ask for one. Always confirm what your fund needs with your accountant or auditor.
Why the value matters
An SMSF's financial statements have to show assets at market value. The value of the fund's property affects members' balances, which can in turn affect contribution limits, pension payments and other calculations. Your auditor checks that the values reported are reasonable and supported by evidence.
If the property value is out of date or cannot be supported, the auditor may raise it as an issue. That can lead to delays, extra costs and questions from the ATO.
What counts as "objective and supportable"
In general terms, a value is supportable if someone else could look at the evidence and see how it was reached. Evidence might include:
- a valuation by a qualified, independent valuer
- a recent sale of the property itself
- sales of comparable properties nearby, with enough detail to show why they compare
- other reliable market data that suits the property
A figure picked by the trustee without evidence, or a number carried forward unchanged year after year, is unlikely to satisfy an auditor.
The ATO publishes guidance on valuing SMSF assets. Read it, or ask your accountant to take you through it, rather than relying on a summary.
When an external valuation is often needed
The ATO's guidance and auditors' practice point to situations where a valuation by a qualified independent valuer is commonly expected. In general terms, these include:
A significant event
Something may have happened that could change the value materially. Examples might be a major renovation, damage, a change of zoning, a big shift in the local market, or the property becoming vacant for a long time.
Transactions with related parties
Where property is bought from, sold to or leased to a related party, the terms usually need to reflect market value. An independent valuation is the clearest way to show that.
The property is unusual
Commercial and industrial property, rural land and unusual homes are harder to value from general market data. An independent report gives your auditor something firm to rely on.
Your auditor asks
If your auditor is not comfortable with the evidence supplied, they may ask for an independent valuation. It is their call whether the evidence is sufficient.
Members retiring or benefits being paid
When a member moves into pension phase, withdraws benefits or the fund is being wound up, a sound market value is especially important. Check with your accountant.
What type of valuation suits an SMSF?
For residential property, a kerbside valuation is often used for SMSF reporting. The valuer inspects from the street, so tenants do not need to be disturbed. Residential kerbside valuations start from $500 + GST.
A full inspection may suit better where the property has been renovated, damaged or is unusual. Commercial and industrial property held in an SMSF is valued with a long-form report, from $975 + GST, with a 7-day turnaround.
If Tom has fully inspected the property before, ask about the discounted rate for an update. Many trustees find a regular update is a practical way to keep the value supportable without starting from scratch.
A sensible approach
Every fund is different, but many trustees take this approach:
- Talk to your accountant and auditor early in the financial year about what evidence they will want.
- Keep a simple file with any sales information, rental records and notes on work done to the property.
- Get an independent valuation when there has been a significant event, a related-party dealing, or when your auditor asks.
- Consider a periodic independent valuation even in quiet years, so the value does not drift too far from the market.
Your accountant or auditor can tell you how often they expect a new valuation for your fund.
Why use a Certified Practising Valuer
A Certified Practising Valuer (CPV) has a tertiary qualification in property, supervised valuation experience and has passed an interview with the Australian Property Institute's Board of Examiners. CPVs also complete ongoing professional development. Tom Nagy holds current CPV registration with the API, and his reports are accepted by the ATO.
Being independent matters too. A valuation from someone with no stake in the fund carries more weight than a trustee's own estimate or an agent's appraisal. For more on that difference, see agent appraisal or certified valuation.
Talk to Tom
If your auditor has asked for a valuation, or you are not sure whether you need one this year, call Tom on 0407 835 388 or send an enquiry. More detail is on the SMSF valuations page.
This guide is general information, not legal, tax or financial advice.