Given the greater degree of uncertainty and subjectivity involved in determining market values in a COVID-19 environment and the additional risk of misstatement; all trustees will be required to have valuations done with supporting data on any property they hold in their SMSF with a valuation date of 30 June 2020 (unless a recent valuation was subsequent to March 2020).
Regardless of who undertakes the valuation, it is required to be based on:
– Objective and supportable data,
– Be capable of explanation to a third party and
– Should include the valuation method used.
Our auditors have confirmed that any valuation which does not clearly evidence the method applied including the inputs will not be sufficient. For example, a real estate appraisal based on comparable sales that does not list out the comparable sales is unlikely to comply with the ATO guidance or be sufficient audit evidence.
Valuation/Appraisal Requirements:
Residential Property
Examples of additional support for residential property include comparable sales (4 or more) in the period April-June 2020 or a suburb trend report. However, any suburb trend report must clearly evidence sales activity has occurred within the quarter to 30 June 2020.
Commercial Property
Examples of additional support for a commercial property outside of comparable sales may include:
- Consideration of the industry associated with the commercial property and whether it has been impacted by COVID-19 (i.e. retail likely to be impact whereas warehouse storage not likely to be)
- Consideration of the location of the commercial property and whether it has been subject to restrictions such as trading or travel restrictions.
- Rental yields for an unrelated tenant
- The nature of the tenancy – reputable company v small business not yet established
- Any impact on the tenant’s business – tenant in rent arrears or rent relief offered.
Signed trustee minutes touching on the above points to support a real estate agents’ appraisal will likely be required this year.
If you have any questions or queries, please don’t hesitate to contact us. We have a few local real estate contacts who can assist with obtaining appraisals if you don’t already have a relationship with an agent and can pass on your details is requested.
