As a SMSF trustee, it is your responsibility to ensure that the assets are valued correctly.
Sufficient appropriate audit evidence must be provided by SMSF trustees to verify the market valuation, including the method used for valuation and the data relied upon. The auditor cannot perform a valuation, but they are required to review the documents provided to ensure that the market value is appropriate and consistent with the evidence provided.
With unlisted investments, it is often the case that the asset’s market value is not readily available.
Accordingly, we provide the following guide to assist you in obtaining the necessary evidence to support the market value of several unlisted assets:
Investments in Unlisted Unit Trusts and Companies
- Financial statements for the unlisted unit trust/company for the relevant year.
- Independent valuations of the underlying assets of the unit trust/company; or
- A unit/share price based on recent sales between unrelated parties; or
- For trusts and companies that are not closely held (i.e. more than 20 investors), a written verification of value provided by a trustee of the trust or a director of the company who is not a related party of the SMSF.
And where the trust or company have related party dealings, verification of arms-length terms should be provided for those transactions.
Loans to an Unrelated Trust or Company
Recoverability of the loan will have an influence on its market value therefore evidence to support the loan value will include:
- Whether repayments are being made in accordance with the loan agreement. A copy of the most recent agreement should be provided.
- A written verification may be requested from the borrower to confirm the value outstanding and current terms of the loan.
- Details of any guarantees or value of assets held as security for the loan.
- Trustees should obtain verification of the value for properties at 30 June 2022.
- This valuation should be evidenced by an independent appraisal/valuation report for the property. This can be performed by a real estate agent where the value is supported by comparable sales or a report may be obtained from an independent valuer.
- If the property is leased to a related party, support for market value rental should also be provided to support the lease value at commencement.
- A copy of the current lease should be provided.
- An independent valuation report.
- Site visit may be requested by the auditor if the asset is a material asset of the fund (please confirm with our office if this the case).
- Copy of insurance policy held by the fund
- Online print out at 30 June 2022 of the SMSF’s holding;
- Market value of cryptocurrency from reliable source at 30 June; and
- Evidence that the wallet is held in the name of the fund.
Where you would like to better understand the market valuation obligations and how you can gather the necessary information to support such a value, please reach out to your Pitcher Partners expert today.