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The Auditors Institute Ltd
.2 min read

Be clear on asset valuations, particularly property

Trustees are responsible for the preparation of SMSF financial accounts and statements – assets must be valued at market value every year, based on objective and supportable data. Asset values impact on transfers between the SMSF and related parties, testing the in-house asset rules and determination of various caps.

Auditors are responsible for checking the valuation of fund assets as part of the annual SMSF audit, making sure that all the fund assets are at market value in the funds financials and that such valuations are based on objective and supportable data. The auditor applies professional judgement in checking that assets have been valued correctly based on the objective and supportable evidence provided by the Trustee.

It is reasonable to expect that an asset’s value will rise or fall during the course of the financial year. Recently the ATO identified approximately 16,500 funds who reported unchanged residential and non-residential property valuations over at least three consecutive years with the absence of the lodgement of an Auditor contravention report. This valuation failure may have been a contravention of SIS Regulation 8.02B and exposed the fund and members to additional tax and administrative penalties. The ATO issued letters to a sample of these funds and their auditors not as part of a compliance activity but as an educational warning of the possibility that numerous funds are not meeting their market value obligations.

It is essential that auditors not only do the work but document on file the data on which they rely, and the conclusions drawn from that.

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