As we approach the end of the financial year at 30th June, it’s an ideal time for planning, review, and compliance. With that in mind, we thought it timely to write a quick blog on Self Managed Super Funds (SMSF) and review one of the auditing requirements that a Trustee must comply with on behalf of their SMSF, specifically related to property owned by their SMSF.
As anyone who has taken the time to setup a Self Managed Super Fund (SMSF) should be aware, Trustees are required to review their property portfolio, including investment strategies and performance, and must ensure compliance with auditing requirements.
One aspect to address, which we’ve alluded to above, is the need for a market appraisal of any properties held within the SMSF. In this blog post, we will explore the significance of market appraisals for SMSFs and discuss two options to meet this requirement to help you keep your SMSF compliant, being formal valuations and informal market appraisals.
At Chapman & Frazer Commercial Real Estate, we offer a range of specialised commercial property services, which includes a Market Appraisal service. We assist trustees of SMSFs in fulfilling their auditing obligations by providing them with up-to-date appraisals for any commercial properties they own in their SMSF structure.
Understanding the SMSF Market Appraisal Requirement
Firstly, when you originally setup your SMSF, acting as the trustee, you must ensure you understand the full range of obligations you have to ensure the SMSF is properly administered and remains compliant. You must also ensure that an independent, registered SMSF auditor completes an annual audit of your SMSF as part of your compliance.
As part of the auditing process, SMSF trustees are required to provide a market value for all properties held within their fund. This appraisal helps ensure the fund’s assets are being reported accurately and in compliance with regulatory guidelines. The market appraisal provides an estimate of the property’s current market value, which serves as a benchmark for financial reporting and decision-making within the SMSF.
Option 1: Formal Valuation by Engaging a Valuer
One way to meet the market appraisal requirement is to engage a professional valuer who specialises in property valuations. A formal valuation involves a comprehensive assessment of the property, taking into account various factors such as location, size, condition, and comparable sales data. A qualified valuer will conduct an in-depth analysis and provide a detailed report outlining the property’s estimated market value. This option offers a thorough and accurate valuation, which can be particularly beneficial for complex or high-value properties.
Option 2: Informal Market Appraisal by a Specialist Agent
Alternatively, SMSF trustees can obtain an informal market appraisal through a specialist agent. This approach provides a less formal but still reliable assessment of the property’s market value. A specialist agent with expertise in commercial properties can assess the property’s characteristics, consider local market trends, and provide an estimation based on their experience and knowledge. While not as detailed as a formal valuation, an informal market appraisal can still meet the auditing requirements and provide valuable insights for SMSF owners, as well as keep their cost of compliance lower.
How Chapman & Frazer Commercial Real Estate Can Help
At Chapman & Frazer, we understand there are complexities involved in managing a self-managed super fund and meeting the necessary auditing requirements. As commercial property specialists, we offer a range of services to assist SMSF owners in fulfilling their obligations and optimising their property portfolio. These services include leasing the property when it becomes vacant, selling the property if that is the decision made by the trustee in the best interest of the SMSF, or simply providing a market appraisal to assist a trustee in satisfying their compliance requirements.
As we approach the end of the financial year, it is an opportune time to review your SMSF and consider any necessary actions or strategic adjustments for the year ahead. Our team of experts can offer valuable advice on commercial property matters, helping you make informed decisions regarding your SMSF commercial property investments. Whether you require advice on a transaction, or simply an informal market appraisal, we are here to support you throughout the process and assist with your compliance with auditing requirements.
Regardless of whether you engage a professional valuation firm, or a specialist commercial real estate agency, you must provide them with clear instructions on your needs, and accurate information about the property and your needs. As the ATO advises, this instruction should include the following:
- The scope and purpose of the valuation (or market appraisal)
- The necessary access to the premises and any relevant records
- Any help necessary to complete the report
The ATO also advises that you should be able to demonstrate the following
- Acknowledgement of the valuer’s (or agent’s) independence to draw conclusions and write their report (or appraisal)
- Recognition that the valuer (or agent) can refuse to provide an opinion or report if you do not provide the information and any explanations they may need
- Statement that any fee payable is not dependent on the outcome of the report
Market appraisals play a crucial role in meeting the auditing requirements for self-managed super funds. Whether through a formal valuation or an informal market appraisal, SMSF trustees can obtain an estimate of their property’s market value, ensuring accurate reporting and compliance. As the end of the financial year approaches, it’s the perfect time to review your SMSF and evaluate your property portfolio. At Chapman & Frazer Commercial Real Estate, we offer specialised services to assist you with market appraisals and provide expert advice on commercial property matters. Contact us today to ensure your have the right advice and to make informed decisions for the year ahead.
Remember, the information provided in this blog post is for general guidance purposes Naturally, this is no substitute for formal advice, so please ensure you speak with your accountant or qualified SMSF advisor to ensure you have a full understanding of your obligations as the Trustee of your SMSF. Your obligations are complex and many, so as the Trustee, you should take due care to ensure you understand the all of the rules and obligations you have when controlling an SMSF, especially in respect of valuing any asset owned by the SMSF. Ato.gov.au is a great resource to educate yourself on your requirements.
