It is considered a best practice by many accountants to value the assets at market value when accounts are being prepared. It is compulsory for accounts prepared for and post 2012-13 financial year end to get valued annually.
Time of valuation
- For real property, unless in case of significant event or a natural disaster, it is not mandatory to review the most recent valuation every year
- Assets like cash, listed securities and widely held funds can be easily and therefore must be valued at the end of FY.
Valuations prepared by qualified, independent valuers are less likely to be challenged by the ATO.
Valuation must be undertaken by an independent valuer in the following cases:
1. an asset represents a significant proportion of the fund’s value, or
2. the nature of the asset indicates that the valuation is likely to be complex.
3. In the case of collectables and personal use assets, the valuer should be a current member of a relevant professional body or trade association such as the Australian Antique and Art Dealers Association, the Auctioneers and Valuers Association of Australia and the National Council of Jewellery Valuers. For real estate, valuations can be undertaken by a property valuation service provider – including online services or a real estate agent.
The valuer can be a professional valuation service provider, member of a recognized valuation body or a person with requisite expertise for it.
Why valuations are a critical component of managing SMSF and why you should pay for them?
Valuations are worth every penny spent as it is the easiest way to make sure that your fund is in full compliance of super laws and leverages the tax advantages at your disposal. Moreover, non compliance can cause you hefty penalties.
The ATO strongly recommends that their new valuation guidelines should be read in conjunction with their publication ‘Market valuation for tax purposes’ to ensure adherence to valuations required for tax purposes also.
Both publications are available on its website https://www.ato.gov.au/