April 2013 Newsletter

In this edition:

Welcome

Market Valuations in SMSFs

Workers Compensation Part 2: Which contractors do I need to cover?

Gunning for Growth in the property market

What are ATO benchmarks?

The ATO has flagged changes to the legislation on the requirements for all self-managed super funds (SMSFs) to report all assets at market value from 1 July, 2012.

Consequently market valuations will need to be conducted for all SMSF assets in the following situations:

• At year end to ensure accounts are reported on a fair and reasonable basis;
• At the commencement of a pension in order to determine the pension components; and
• When a member is exiting the fund or requests benefits to be rolled out to ensure that the member rolling out the benefits gets their fair share of the assets' value.

According to ATO guidelines the determination of a market value must be fair and reasonable. This will be the case if the valuation:

• Takes into account all relevant factors and considerations likely to affect the value of the asset;
• Is undertaken in good faith;
• Uses a rational and reasonable process; and
• Is capable of explanation to a third party.

The ATO recognises that what is fair and reasonable will be dependent on the asset being valued. For example, real property valuations will need to consider:

• Recent sales of similar properties in the area;
• The amount that was paid for the property in an arm's length market;
• Independent appraisals;
• Whether the property has undergone improvements since it was last valued;
• For commercial properties, net income yields.

The valuation guidelines for self-managed superannuation funds are available on the ATO website. 

Failure to prepare accounts on a market value basis is a strict liability offence and can be punishable by a fine of up to 100 penalty units ($170 per unit from 28 December 2012), that is $17,000.

Contact us at Goodwin Chivas & Co if you have any queries.