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Let’s Talk Property Valuations

The ATO has announced recently that trustees are required to confirm the market value of any properties held by their SMSF each year.
This doesn’t necessarily mean a new valuation is required each year, however, if the trustees wish to use the same valuation two years in a row, they need evidence or supporting information as to why the valuation still represents the current market value in the second year.
The following valuation methods can be relied upon without requiring any secondary source of information:
  1. Valuations undertaken by a:
    • Registered valuer
    • Professional valuation service provider
    • Member of a recognised professional valuation body.
  2. Online valuations that include supportable data with recent comparable sales
  3. Market appraisals made by an agent that provides for verifiable data (an example of verifiable data could be recent similar sales, comparable lease data and net income yields) d. Where the property was purchased within 12 months of 30 June of the year being audited, and no recent significant events have transpired since the purchase
Where none of the above valuations are obtained, any two of the following options would suffice:
  1. Rates notice
  2. Market appraisals made by an agent without supportable data
  3. Rental income yield using capitalisation rate calculation
Other things to note:
  1. All of the above valuation methods are based upon recent ATO correspondence. The most recent source of information can be found here.
  2. Commercial property valuations can be complicated to obtain, as the type of property can be quite unique and there might be limited sales data available in which to make comparisons. For this reason, the cost of obtaining a commercial valuation is generally greater than a residential property as it may require a registered valuer to review the property.
Whilst the trustees may incur additional costs within their fund in meeting the valuation requirements, the information outlined by the ATO provides clarity for the industry.
For further information please do not hesitate to get in contact with us.
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