SMSF Property Valuation

Reliable residential property valuations to establish the market value of your assets

SMSF trustees need an SMSF property valuation to monitor their investments in real property – i.e., land and fixtures and structures on the land.

A valuation can be done by anyone, provided

  • It follows a reasonable process,
  • Reflects the asset’s market value, and
  • Includes objective and supportable data (more on this later).

Independent appraisals are done by a property valuation service provider – this might be a qualified independent valuer, online services or real estate agent.

When Do Self-Managed Superannuation Funds Need Property Valuations?

The value of all SMSF assets must be reported every year.

Current valuations are required for assets such as shares and managed funds. However, property valuations can carry over for some years – the rule of thumb is three years.

The Australian Taxation Office (ATO) valuation guidelines suggest a new property valuation if

  • The previous valuation undertaken has become considerably or materially inaccurate, or
  • A significant event, such as a natural disaster, market volatility, or a major renovation may have changed the asset’s value.

It is also advisable to do regular valuations if property forms a significant proportion of the self-managed super fund’s investments.

According to Australian Taxation Office statistics, over 30% of all SMSFs have invested in real property. Property assets are worth $147 billion and represent about 20% of all assets held by SMSFs.

And there’s good reason to invest in real property. ASIC’s Moneysmart website reports an average return of 6.3% per year over the last ten years. This can be compared to the 3-4% per year on fixed interest and 6.5% on shares for the same period.

Why Do You Need An SMSF Property Valuation?

SMSF trustees and members use valuations or independent appraisals to track the performance and value of the real property assets in their self-managed super fund. They also need them for annual financial statements, audits, and tax returns.

Up-to-date balances are needed for pension funds, to calculate the minimum pension requirements for the next year.

SMSF auditors and the ATO use real valuations to track compliance with SMSF legislation and regulations and for statistical purposes.

Property And Superannuation Regulations

Only licensed accountants and advisers can provide financial product advice based on SMSF members’ personal circumstances and other relevant factors. They must ensure that property investments comply with the rules that apply to self-managed super funds.

Some specifics include

  • The sole purpose test
  • Related parties and the arm’s-length rule
  • Market value
  • Objective and supportable data
The Sole Purpose Test

Any property must meet the test that it has been purchased solely to provide retirement benefits to members.

It cannot be used for any pre-retirement benefit of members – e.g., a property used as a holiday home by members. Neither can there be any benefit to related parties – e.g., a property explicitly bought as accommodation for a child while at university.

Related Parties And The Arm’s Length Rule

Residential properties cannot be bought from or leased to a related party. A related party includes members, relatives, associates of members, and their spouses, and even directors and spouses of companies or trusts where members have an interest or influence.

Commercial properties have a different rule. Trustees may buy from or lease to anyone, including themselves, provided

  • The premises are used for business purposes only.
  • The arrangement is on an arm’s length basis. So the property must be bought at market value. The lease must match standard commercial agreements, with the rental as would be charged to an unrelated party.
  • Commercial properties that have followed the arm’s length rule are exempt from the in-house assets rule. This rule is that any loan, investment, or lease with a related party must have a value less than 5% of the fund.

Market Value And Objective And Supportable Data

The ATO defines market value as:

“The amount that a willing buyer of the asset could reasonably be expected to pay to acquire the asset from a willing seller if:

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

Determining market value is the primary purpose of an SMSF property valuation. The value assigned must be supported by objective and supportable data.

Trustees can obtain sufficient objective and supportable evidence by using input from several sources. ATO guidelines suggest that two or more of the following would support real property valuations:

  • A comparison with other similar properties or recent comparable sales results
  • The amount that the SMSF paid for the property – provided it was bought relatively recently, in an arm’s length manner, and there has been no material change in its market value
  • Kerbside independent valuations from real estate agents (observing the property from the outside, not going inside)
  • The rates notice (if it is consistent with other evidence)

Why Use SMSF Engine For Your SMSF Property Valuation

We provide friendly and professional SMSF administration services to SMSF accountants and financial advisers. They can focus on providing strategic and financial advice to their clients and leave the administration to a trusted partner.

We also provide services directly to SMSF trustees.

We do not give investment advice, but we can source valuations for most residential property assets.

We do not arrange valuations of commercial property, although we may be able to give a sales history and comparison with similar properties.

Standalone Valuations

We use SQM Research to provide desktop residential property valuations that meet ATO guidelines, including

  • Objectively demonstrating the valuation process
  • Delivering objective and supportable evidence, and
  • Meeting reporting requirements

The online SQM Property Explorer has an extensive database of properties in all Australian states.

Individually customised reports are based on your information and sales figures of comparative properties in the same area.

  • Sales data is down to the street level
  • The database has values for the past twenty years. A useful feature is that you can find a value on a precise date – so you can meet the ATO requirement for a market valuation close to 1 July of each year
  • It provides rental data and rental estimates

There is a confidence score for each valuation. Low or medium confidence might reflect a lack of comparable sales or no known last sale price. When there is insufficient data, the report will give known information without a market valuation.

If there is a significant difference in the estimate you provided and the external valuation from SQM, we will contact you.

Valuations For SMSF Annual Financial Statements, Audits, And Tax Returns

SMSF Engine is well-placed to help you meet annual requirements for financial statements, audits, and tax returns.

Annual Financial Statements

We offer Daily, Daily Plus, and Annual administration services for trustees, SMSF accountants, and financial advisers.

  • We prepare annual financial accounts as part of all packages.
  • We monitor property transactions for compliance, update the balance sheet, and keep track of supporting valuation evidence.

Annual Audits

The role of SMSF auditors is to check that property assets have been reported at market value and that the basis for valuation is appropriate.

We can provide title searches and valuations to assist your auditors in estimating value or establishing a property’s ownership.

We refer all SMSF audits to a panel of independent auditors, and you can deal with them directly through our online portal. If you are using our administration services, we ensure that all the correct records are available to minimise the chance of audit queries.

Audit fees can be bundled together with our administration packages.

Annual Tax Returns

Our Daily and Annual administration packages include pro forma tax returns. We act as your Tax Agent and lodge returns on your behalf as part of the Daily Plus package.

You can add this service to the other packages if you wish.

Costs of SMSF Property Valuation

Administration ServiceFees
Residential Property Valuation$99Download form
Title Search
NSW, VIC, QLD$55Download form
Other States & Territories$99

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