2021 property valuation requirement changes

Important changes to property valuation requirements in 2021 

The biggest change in our approach to the audits of SMSFs for the year ended 30 June 2021 concerns the valuation of real property. 

This carefully considered change has been driven by the combination of the Australian Taxation Office's latest version of their Valuation guidelines for self-managed super funds and their compliance activity in relation to SMSF auditors.  The ATO continues to review auditors closely and report they regularly find a lack of evidence on SMSF audit files to support trustee compliance with regulation 8.02B, with this being a key factor in the high number of SMSF auditors they refer to ASIC for review.  The ATO's compliance activities demonstrate their expectations are clear, adherence to their guidelines by both trustees and auditors is a must. 

Whilst we don't necessarily agree with everything within the ATO's guidelines, we have no option but to follow their requirements and therefore, we have produced our own guidelines for trustees and accountants which align with the requirements of the ATO (Property Valuation Guidelines). Our key objectives when compiling our guidelines were to:

• Ensure our position is clear and unambiguous; and
• Provide guidance to our clients so they know what they need to provide to ensure we have the audit evidence we require.

We ask that all our clients read through our guidelines and adopt their requirements immediately. 

Specifically, we ask that our clients please use the templates provided and attach the necessary information in the first instance.  Our audit team has previously attempted to locate information to confirm a value provided in the financials however we are no longer able to do this.  It is not our role to research and gather evidence to support a trustee's valuation of an asset; instead our audit opinion will be based solely on the information provided to us.

We are aware compliance costs may increase as a result of the new guidelines (e.g. agents may charge for including comparative sales on their kerbside appraisals) however this is now the price trustees might have to pay for owning real property in their SMSF.  What was once sufficient for audit purposes may no longer suffice; in particular we stress that obtaining an agent's kerbside valuation once every three years is not an appropriate approach.

If sufficient audit evidence which meets the requirements of our guidelines is not provided to us our approach will be clear.  In the first instance, we will ask for further evidence but however, if it is not forthcoming, we will have no option but to qualify both Parts A and B of our audit report, and also report to the ATO in an Auditor Contravention Report that the trustees may not have met the requirements of regulation 8.02B.

If you have any questions about the new Property Valuation Guidelines, please do not hesitate to contact Baumgartner Super on 1300 04 SMSF.