ATO Property Valuation Guidelines – What’s Changed?

It is a requirement under the Superannuation legislation to have asset’s recorded in the financial statements at market value. If you hold property in your fund, you may have experienced in the past the fund auditor or administrator requesting a current appraisal or valuation on a property held in the fund. This subsequently entailed a phone call to the local real estate agent requesting an appraisal on the property held in the fund. The real estate agent would then issue what is commonly referred to as a ‘kerbside’ or ‘desktop’ appraisal.

Is this still acceptable under the ATO Valuation Guidelines?

The ATO has updated its valuation guidelines in the past year. The ATO notes that when valuing real property, you may wish to consider using a qualified independent valuer, especially where the value of the property represents a significant proportion of the fund’s value

If you choose to do so, you are not required to obtain an external valuation each year. However, you still need to ensure the external valuation can be used to support the market value you have used when preparing the fund’s financial accounts and statements for any subsequent year.

If an external valuation has become materially inaccurate or a significant event (E.g. Natural disaster, COVID-19) has occurred that may have affected the value of the property since it was last valued you should no longer rely on it and obtain a new valuation or other evidence to support your valuation.

When valuing real property, relevant factors and considerations may include:

• the value of similar properties and recent comparable sales results
• the amount that was paid for the property in an arm’s length market – if the purchase was recent and no events have materially affected its value since the purchase
• independent appraisals from a real estate agent (kerbside/desktop appraisals)
• whether the property has undergone improvements since it was last valued
• the rates notice (if consistent with other valuation evidence)
• for commercial properties, net income yields (not sufficient evidence on their own and only appropriate where tenants are unrelated).

Unless the property has been recently purchased by the fund, you should consider a variety of sources to substantiate the market value of real property. The ATO states, “generally, it is not sufficient for valuations to be based on only one item of evidence in the above list.” When valuing real property assets for the purpose of preparing the fund’s financial accounts and statements, the valuation may be undertaken by anyone as long as it is based on objective and supportable data. A valuation undertaken by a property valuation service provider, including online services or real estate agent, would be acceptable.  However, the valuation must stipulate the supportable data.  For example, in the case of a real estate agent appraisal or online report, the valuation should list the comparable sales it relied on.

As the end of the financial year is approaching, we would suggest you look at the documentation that will support the property value in the financial statements. Further to this if you are arranging an appraisal for use in the preparation of the financial statements, we recommend you consider the updated ATO valuation guidelines.

If you have any concerns with meeting the updated ATO valuation guidelines please contact us.