If you have property in a self-managed super fund, there’s certain rules surrounding why you need a valuation. We talk to a valuation expert to find out what these rules are, so you don't get caught out at lodgement time.
Investors with property in an SMSF need to value their property at certain intervals, according to guidelines by the Australian Tax Office, but it’s not simply case of just seeing how much your property has grown.
Speaking to Smart Property Investment, Sally Dale, state director for NSW, the ACT and Queensland of Opteon, said the reasoning behind the valuations was due to having up-to-date annual financial statements.
“If you’ve got a self-managed super fund, you have to prepare annual financial statements and accounts, and they need to include the market value of any property asset that people may hold in their self-managed super fund,” Ms Dale said.
While SMSF-holding property investors need to list the market value of their properties every year, they don’t necessarily have to be valued every year.
“You have to list your market value of your assets every year in your statements, but the ATO does specify that you don’t have to get a valuation every year,” Ms Dale said.
“When there’s been some significant changes in the market or you may have done renovations to a property or there may have been some significant event that may affect the value of the property, then they recommend that you get a valuation done.
“Take Sydney for example: … Some sectors of the market have come down 10, 15 per cent in the last 12 months. That … market volatility is one of the reasons that the ATO list when you need to get a new market valuation.”
Besides renovations market volatility, other reasons that require a new market valuation include natural disasters and macroeconomic events.
When an investor moves into pension mode, there are more rules that need to be followed.
“You need to actually list the value of your assets and also, if you hold property in-house within your super fund, there’s a rule that only 5 per cent of your super fund can have in-house assets,” she added.