Show download pdf controls
  • Regulation 8.02B and evidence required to support real property valuations

    Assets must be valued every year

    From 1 July 2012 when trustees prepare the financial statements and accounts for their self-managed super fund (SMSF), they must report the fund assets at market value to comply with regulation 8.02B of the Superannuation Industry (Supervision) Regulations 1994 (SISR).

    Prior to Regulation 8.02B coming into effect on 7 August 2012, unless the fund was paying a pension or held in-house assets, trustees could provide a valuation for fund assets every three years. This is no longer sufficient, and assets must be reported at market value every year with evidence to support the valuation.

    Real property valuations

    When valuing real property, an SMSF trustee may consider using a qualified independent valuer (external valuer), especially where the property represents a significant proportion of the fund’s value. If they choose to do this, an external valuation is not required each year.

    However if the trustee believes the external valuation has become materially inaccurate or, the value of the property has since been affected by events such as a natural disaster or COVID-19, they should no longer rely on it and obtain a new valuation or other sources of evidence supporting the valuation.

    Trustees must provide objective and supportable evidence to their auditor

    Each year trustees must provide objective and supportable evidence in accordance with the requirements under our SMSF valuation guidelines to their auditor. This demonstrates compliance with regulation 8.02B.

    Real estate agent appraisals stating what the property is likely to sell for based on sales in the area, without listing details of those sales, would not on its own be sufficient and appropriate.

    The evidence should also support a market value for the property as close as possible to 30 June, especially where the market is potentially volatile.

    Listed below are some of the documentation we consider acceptable evidence for substantiating the market value of real property other than an external valuation.

    Generally, a single item of evidence listed below will not be sufficient on its own unless the property has been recently sold. We suggest a variety of sources of evidence to support compliance with regulation 8.02B which may include:

    • independent appraisals from a real estate agent (kerb side)
    • contract of sale if the purchase is recent and no events have occurred to the property that could materially impact its value since the purchase
    • recent comparable sales results
    • rates notice (if consistent with other evidence on valuation)
    • net income yield of commercial properties (not sufficient evidence on their own and only appropriate where tenants are unrelated).

    Responsibilities of the trustee and auditor

    It is the trustee's responsibility to provide documents requested by their auditor which supports the market valuation for their assets. It is not the auditor’s role to determine the market value of the fund’s assets.

    The auditor must obtain sufficient appropriate evidence in accordance with Auditing Standard ASA 500 Audit Evidence, either from the trustee or external sources, to form an opinion about whether the SMSF has complied with regulation 8.02B. The auditor must also document that evidence and any judgments made in their audit file.

    Where the evidence is not sufficient and appropriate to enable the auditor to form an opinion the asset was valued at market value, the auditor must modify their audit report and consider whether an Auditor/actuary contravention report (ACR) should be lodged.

    Impacts of COVID-19

    During the 2020 and 2021 financial years, if the trustee has difficulty obtaining valuation evidence due to the impacts of COVID-19, auditors should still consider modifying Part B of the audit report and lodge an ACR if necessary. They should provide reasons on the ACR as to why the trustee was unable to obtain the appropriate evidence.

    If we are satisfied this was due to the impacts of COVID-19, the contravention will not result in penalties. Instead the trustee will receive a letter from us advising them to ensure they comply with our valuation guidelines and have supporting valuation evidence by the time of their next audit if possible, as repeated contraventions can lead to penalties.

    See also:

    Keep up to date:

      Last modified: 15 Oct 2020QC 64053