How often does a SMSF need to value property

How often does a SMSF need to value property? Self-Managed Super Funds (SMSF) are required to value property at market value at least annually in accordance with the SIS Act and Regulations under section 35B(2) and regulation 8.02B. Property which is acquired or sold to a related party of the fund must be valued at market value at that time. The following are events requiring property to be valued at market value:

establishing new retirement phase pensions which are required to be reported to the ATO ensuring the total amount in pension phase does not exceed the member’s personal transfer balance cap (PTBC) which is $1.9million for the 2024/25 financial year for a member who is establishing a pension for the first time
members wanting to utilise their carry forward concessional contributions cap can only do this if their total superannuation balance (TSB) at the prior 30^th June is less than $500,000
pension payments are based on a percentage of the member’s pension account at 30^th June in the prior year
members using the work test exemption rule to claim a superannuation deduction for personal contributions may be eligible where the member has a TSB less than $300,000 at the 30^th June in the prior year
eligibility to make non-concessional contributions (NCC) in 2024/25 includes having a TSB less than $1.9million at 30^th June 2024 provided you are not in an existing bring-forward arrangement where you may have been eligible to bring-forward 1 to 2 years of your annual NCC cap from future years

Property was historically valued every three years based on opinions from real estate agents or registered valuers. Courts have ruled against auditors in cases where SMSFs suffered losses due to failed investments, citing insufficient measures to verify the nature, existence, and valuation of investments. Auditors now require independent evidence of market value for SMSF properties.

Total Superannuation Balance – includes a member’s total amount of the retirement phase value of pensions, accumulation accounts across all superannuation funds, rollovers in transit and the outstanding limited recourse borrowing arrangement (LRBA) amount which only effects new or refinanced loans after 1 July 2018 in relation to related party loans or bank loans when you have previously satisfied a condition of release such as turning 65 or over 60 (not yet 65) and retired less any personal injury or structure settlement contributions.

Obtaining market valuations

Cotality (Formerly Corelogic)

How often does a SMSF need to value property - Cotality Cotality integrates with our Class Super software to provide free residential property valuations for SMSFs. It offers comprehensive, independent market data, including sales prices and confidence levels in valuations. Auditors accept Cotality/Corelogic reports with high confidence as sufficient evidence; otherwise, additional valuation evidence may be required.

Hint – We note that Corelogic is being rebranded to Cotality in 2025.

Real Estate Agent Valuation

Real estate agents often provide written statements, merely showing the property address and the value but no analysis or evidence of property market valuations which were historically accepted by auditors. However, auditors now require objective and supportable evidence. Comparative sales of similar properties near or just after the financial year end are needed, with 3 comparatives recommended, to support the valuation.

SMSF Trustee Valuation

An auditor will accept a valuation prepared by a trustee provided the valuation has been arrived at using a fair and reasonable process and includes:

factors affecting property value: number of bedrooms, bathrooms, build date, garages, materials used, and position
recent comparable sales in the area from website-based providers
provide 3 examples of comparable sales as best practice
form valuation logically and ensure it can be understood by others
for recent purchases from unrelated parties with no events affecting valuation, the purchase price may be reasonable at 30th June
council rates are acceptable for vacant land as secondary evidence to support other audit evidence

Qualified Valuer’s Report

The ATO relies on an independent qualified valuer’s report for the best audit evidence, especially in related party transactions. Although a qualified valuation is not mandatory when dealing with related parties it is important to obtain accurate valuations in these cases. When the property investment in the SMSF represents a significant portion of the fund’s assets or the property has unique characteristics it is advisable to obtain a valuer’s report which must include recent comparative sales or other relevant analysis.

What happens if there are no comparative sales?

A kerbside valuation by a real estate agent without comparable sales is insufficient for audit purposes. Additional evidence, such as recent comparable sales (preferably three examples), can support the valuation. Net income yield may also be considered when the tenant is unrelated. When rent to a related tenant is backed by a qualified valuer or other independent evidence, the net income yield can help substantiate the property’s market valuation.