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.
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.
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.