When an SMSF holds real property, the Australian Taxation Office (ATO) has clear expectations about how the market value of that asset is determined for reporting and audit purposes. Importantly, valuations must be supported by objective and supportable evidence, rather than opinion alone.
The ATO's guidance on verifying the market value of SMSF assets makes it clear that trustees and auditors must consider the quality and reliability of the evidence used to support a valuation. Where a property has not been recently acquired under an arm's length transaction, a valuation must be based on information that reasonably reflects current market conditions.
The ATO's guidance for SMSF auditors can be found here: https://www.ato.gov.au/tax-and-super-professionals/for-superannuation-professionals/smsf-auditors/auditing-an-smsf/verifying-the-market-value-of-fund-assets
In addition, the ATO's broader guidance on SMSF asset valuations is available here: https://www.ato.gov.au/individuals-and-families/super-for-individuals-and-families/self-managed-super-funds-smsf/smsf-administration-and-reporting/guide-to-valuing-smsf-assets
Where a market valuation is obtained from a real estate agent, online valuation service, or similar provider, the ATO expects that valuation to be supported by comparable sales data. Comparable sales demonstrate how the value was derived and provide objective market evidence that can be reviewed and assessed by an auditor.
A valuation that merely states an estimated figure, without identifying the comparable properties relied upon, does not provide sufficient evidence on its own. From an audit perspective, it is not enough to know what the value is--there must be clarity around how that value was determined.
Auditors are required to obtain sufficient and appropriate audit evidence to support the value of fund assets. If a valuation does not include details of comparable sales, the auditor may not be able to rely on it as adequate evidence of market value.
This applies even where:
Without supporting market data, the valuation may be considered subjective rather than evidence-based.
If you are relying on a real estate agent's appraisal or valuation report, ensure that it:
If the valuation letter does not include this information, it is strongly recommended that you request an updated version that sets out the comparable sales relied upon.
Providing this level of detail helps ensure the valuation meets the ATO's expectations and can be relied upon for audit purposes.