• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
  • Skip to footer

SuperGuide

Superannuation and retirement planning information

  • SuperGuide Premium
  • Account
  • Log In
  • SuperGuide Premium
  • Account
  • Log In
  • How super works
    • Super for beginners
    • Super rules
    • Employers guide to super
    • Super contributions
    • Super and tax
    • Accessing super
    • Super news
    • Women and super
    • Super tips and strategies
    • How-to guides
    • Super quizzes
    • Superannuation Q&As
    • Superannuation glossary
  • Super funds
    • Best performing super funds
    • Super fund rankings
    • Best performing pension funds
    • Pension fund rankings
    • Super fund average returns
    • Super investing strategies
    • Comparing super funds
    • Choosing a super fund
    • Choosing an investment option
    • Super fund fees
    • Insurance and super
    • Super fund profiles
  • SMSFs
    • SMSFs for beginners
    • SMSF administration
    • SMSF checklists
    • SMSF compliance
    • SMSF investing
    • SMSF pensions
    • SMSF strategies
    • SMSF Q&As
  • Plan your retirement
    • Retirement planning for beginners
    • When should I retire?
    • How long will I live?
    • How much super do I need?
    • Will I get the Age Pension?
    • How much will I spend in retirement?
    • Financial advice
    • Retiring overseas
    • Preparing for retirement
    • Retirement planning strategies
    • Retirement calculators and reckoners
  • In retirement
    • Income in retirement
    • Super lump sums
    • Super pensions
    • Age Pension
    • Working in retirement
    • Life in retirement
    • Senior concessions and services
    • Aged care
    • Estate planning
    • Super death benefits

Home / SMSFs / SMSF investing

A step-by-step guide to valuing tricky assets

January 4, 2021 by Penny Pryor Leave a Comment

Reading time: 4 minutes

On this page

  • Why are valuations important?
  • COVID-19 relief
  • The bottom-line

SMSFs are required to value their assets at market value every financial year. This is easy enough for listed assets, such as equities, but it’s not so straightforward for unlisted assets like commercial property or collectables.

The Australian Taxation Office (ATO) defines market value as the following:


It is the amount that a willing buyer of the asset could reasonably be expected to pay to acquire the asset from a willing seller if all the following assumptions were made – that the:

  • Buyer and the seller dealt with each other at arm’s length in relation to the sale.
  • Sale occurred after proper marketing of the asset.
  • Buyer and the seller acted knowledgeably and prudentially in relation to the sale.

Why are valuations important?

Valuations are used for many things in the day-to-day running of an SMSF, not least of which is in preparing an SMSF’s annual financial statements. An accurate valuation is also required to make sure your SMSF has complied with the relevant superannuation laws around SMSFs acquiring assets from related parties, and investments made on an arms-length basis.

A commercial property used by a viable business that is acquired by an SMSF for $1, for example, has not been acquired at the correct market valuation or on an arms-length basis.

If it had been acquired from a family member at less than its market price then the SMSF has also likely contravened the related party transaction requirements as well.


Advertisement
SuperGuide Premium is ad-free

So how should SMSFs go about valuing their assets? Here’s our five-step guide:

Step 1: Assess your SMSF’s holdings

Get the valuation of your listed assets in order – which is likely to be as simple as assessing their trading value on the last day of the financial year. Once you’ve done that you should have an understanding of the proportion of your fund that is represented by non-listed and listed assets. Even if you are not sure of the current value of your unlisted asset you will recall the price you paid for it and that should give you some idea of whether or not it makes up a significant percentage of your fund.

Step 2: Work out whether you need to pay to get an asset professionally valued

This will depend on what proportion of the fund the asset takes up or if the nature of the asset indicates the valuation is likely to be complex – for example, a boat or a boating club membership. If most of your SMSF is invested in a property, then you need to seriously consider a professional valuation for that asset.

Step 3: Get the asset valued

The ATO says it is more about the valuation and the data used to obtain the valuation than the valuer themselves. Unlike auditors (which need to be approved by the Australian Securities and Investments Commission) you only need to use a qualified independent valuer in certain instances (see Step 4). Otherwise a valuation can be conducted by one of the following:

  • A registered valuer.
  • A professional valuation service provider.
  • A member of a recognised professional valuation body.
  • A person without formal valuation qualifications but who has specific experience or knowledge in a particular area.

Step 4: Use a qualified independent valuer if required

In many instances collectibles and personal use assets will need to be valued by a qualified independent valuer. Collectibles and personal use assets include (but are not limited too) artwork, jewellery, antiques, coins, medallions or bank notes, rare folios, manuscripts or books, memorabilia, wine or spirits, recreational boats, and memberships of sporting or social clubs. As a general rule of thumb, a qualified independent valuation is probably a good idea for all collectibles.


Need to know

Under the super laws it is imperative that a qualified independent valuer value the asset from 1 July 2011 if the collectible or personal use asset was acquired on or after 1 July 2011 and disposed of to a related party. A qualified independent valuation is also required from 1 July 2016 for any collectible or personal use assets that were acquired by the SMSF before 1 July 2011 and disposed of to a related party after 30 June 2016.


Step 5: Get the asset re-valued as required

Sometimes, such as for real property, unless there is a major event that effects the valuation you will not need an external independent valuation every year. A new valuation will be required if the trustee believes the value of the property has been materially affected by natural disaster – or a pandemic. Just because an external valuation is not technically required every year doesn’t mean a valuation is set and forget. You should consider whether your valuations for unlisted assets are up to date and accurate every year. Your auditor may also suggest that it’s time for a new valuation when they do your accounts.

Compare super funds

Read more...

Advertisement

Need to know

The ATO is keeping a close eye on real property valuations – you can see their update here. It also offers some helpful information around what it will, and won’t, except as “objective and supportable” evidence for a valuation.

“Real estate agent appraisals stating what the property is likely to sell for based on sales in the area, without listing details of those sales, would not on its own be sufficient and appropriate,” the update says.


The ATO suggests the following as sources of evidence of a valuation:

  • Independent appraisals from a real estate agent (kerb side).
  • Contract of sale if the purchase is recent and no events have occurred to the property that could materially impact its value since the purchase.
  • Recent comparable sales results.
  • Rates notice (if consistent with other evidence on valuation).
  • Net income yield of commercial properties (not sufficient evidence on their own and only appropriate where tenants are unrelated).

But the regulator says just one of the above on its own is not likely to provide sufficient evidence. Rather, it would be best to provide a number of these documents.

COVID-19 relief

There is some relief provided to SMSFs if they have difficulty valuing assets because of COVID-19. Auditors will still be required to file a contravention report if they believe the trustee has provided insufficient evidence for an asset valuation. But if they cite COVID-19 related issues as reasons for why the trustee couldn’t provide evidence, and the ATO is satisfied that is the case, the regulator will not impose penalties on the trustee.

“Instead the trustee will receive a letter from us advising them to ensure they comply with our valuation guidelines and have supporting valuation evidence by the time of their next audit if possible, as repeated contraventions can lead to penalties,” the ATO says.

The bottom-line

An accurate valuation of all the assets in your SMSF is crucial to ensure you maintain compliance with the relevant superannuation laws. So, make sure you don’t get complacent and follow our five-step guide.

Want to learn more about running an SMSF?

Become a SuperGuide Premium member and access expert guides for SMSFs, on topics such as costs, compliance, administration, investment, borrowing and pensions. Discover valuable super and retirement strategies, the most popular shares, managed funds and ETFs for SMSFs, the latest super rates and thresholds, contributions caps and more.

Includes more than 500 articles, how-to guides, checklists, tips, calculators, case studies, quizzes and a monthly newsletter.

Find out more


Learn more about SMSF compliance in the following SuperGuide articles:

Guide to SMSFs and insurance

January 14, 2021

What are the SMSF residency requirements?

June 1, 2020

Guide to SMSF trust deeds

June 1, 2020

SMSF compliance: What are trustees’ responsibilities?

May 1, 2020

SMSFs: What to do if you get a breach notification from the ATO

April 1, 2020

What is the sole purpose test, and how does it work?

December 1, 2019

Total Superannuation Balance: When it applies and what is included

May 7, 2019

SMSF investment rules: What every trustee should know

February 15, 2019

Learn more about SMSF investment in the following SuperGuide articles:

SMSF investment rules: Collectables and personal use assets

October 15, 2020

What are the SMSF borrowing rules?

August 6, 2020

How to create an SMSF investment strategy (including example documents)

August 6, 2020

How to achieve genuine diversification in an SMSF

August 3, 2020

How do SMSF retirees invest?

March 14, 2020

10 steps to buying a commercial property and leasing it to your SMSF

February 12, 2020

What on earth is an in-specie transfer?

January 15, 2020

How to invest in infrastructure through an SMSF

October 1, 2019

ETFs: How do I use them and what do they cost?

June 19, 2019

SMSF guide to hedging

May 1, 2019

SMSFs and property: A Super Guide

April 5, 2019

The definitive SMSF guide to franked dividends

April 2, 2019

SMSF investment rules: What every trustee should know

February 15, 2019

Related topics

SMSF investing SMSFs

IMPORTANT: All information on SuperGuide is general in nature only and does not take into account your personal objectives, financial situation or needs. You should consider whether any information on SuperGuide is appropriate to you before acting on it. If SuperGuide refers to a financial product you should obtain the relevant product disclosure statement (PDS) or seek personal financial advice before making any investment decisions. Comments provided by readers that may include information relating to tax, superannuation or other rules cannot be relied upon as advice. SuperGuide does not verify the information provided within comments from readers. Learn more

© Copyright SuperGuide 2009-21. Copyright for this article belongs to SuperGuide Pty Ltd, and cannot be reproduced without express and specific consent. Learn more

Reader Interactions

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Primary Sidebar

How super works
Super for beginners
Super rules
Employers guide to super
Super contributions
Super and tax
Accessing super
Super news
Women and super
Super tips and strategies
How-to guides
Super quizzes
Superannuation Q&As
Superannuation glossary
Super funds
Best performing super funds
Super fund rankings
Best performing pension funds
Pension fund rankings
Super fund average returns
Super investing strategies
Comparing super funds
Choosing a super fund
Choosing an investment option
Super fund fees
Insurance and super
Super fund profiles
SMSFs
SMSFs for beginners
SMSF administration
SMSF checklists
SMSF compliance
SMSF investing
SMSF pensions
SMSF strategies
SMSF Q&As
Plan your retirement
Retirement planning for beginners
When should I retire?
How long will I live?
How much super do I need?
Will I get the Age Pension?
How much will I spend in retirement?
Financial advice
Retiring overseas
Preparing for retirement
Retirement planning strategies
Retirement calculators and reckoners
In retirement
Income in retirement
Super lump sums
Super pensions
Age Pension
Working in retirement
Life in retirement
Senior concessions and services
Aged care
Estate planning
Super death benefits
Advertisement
Compare super funds

Join SuperGuide Premium and give your retirement plans a boost.

Get access to independent expert commentary on the latest super, retirement and SMSF issues, including the top performing super and pension funds, how much super is enough, the latest super rates and thresholds and new super measures and strategies.

You’ll have access to more than 500 articles, how-to super guides, checklists, tips, calculators, reckoners and other tools, as well as a monthly newsletter.

Find out more

Footer

Important: Disclaimer

All information on SuperGuide is general in nature only and does not take into account your personal objectives, financial situation or needs.

You should consider whether any information on SuperGuide is appropriate to you before acting on it.

If SuperGuide refers to a financial product you should obtain the relevant product disclosure statement (PDS) or seek personal financial advice before making any investment decisions.

Learn more

About SuperGuide

SuperGuide is Australia’s leading superannuation and retirement planning website. Learn more

Superguide Pty Ltd ATF Superguide Unit Trust as a Corporate Authorised Representative (CAR) is a Corporate Authorised Representative of Independent Financial Advisers Australia, AFSL 464629

  • Contact us
  • Advertise on SuperGuide
  • Careers

Before using this website

  • New to SuperGuide?
  • Terms and Conditions of Use
  • Financial Services Guide
  • Privacy Policy and Privacy Collection
  • Copyright Policy
  • Editorial Policy and Complaints
  • Disclaimer

  • SuperGuide Premium
  • Subscriber feedback
  • Sitemap