SMSF Property Valuation
A common investment in a Self-Managed Superannuation Fund (SMSF) is property. As this is a rather large asset, for many it will take up the majority of their fund’s total assets. That means it should be regularly valued by an independent Certified Practising Valuer (CPV). This will be an experienced expert in real estate valuations and the requirements of an SMSF.
Why is a valuation needed?
Valuations are useful on any number of occasions and managing your superannuation is no different. The primary use of a property valuation is to report market value.
SMSF valuations can be used by relevant authorities to:
- Determine the value of assets supporting a super pension
- Confirm in-house assets do not exceed 5% of the total value of the fund’s assets
- See if you are eligible for transitional CGT relief
- Prepare SMSF financial accounts and statements
- Ensure the management of the fund’s investments best serves the financial interests of members
Along with the many other uses for valuation reports, SMSF auditors also examine the report as part of their annual audit. They assess the basis for the valuation and report and whether it was appropriate. The auditor ensures that the valuation has been conducted correctly.
How are SMSF property valuations conducted?
SMSF property valuation must comply with set principles. It must be conducted in good faith and have been made using a rational process.
Most valuers will use the direct comparison and cost summation methods. This combination results in a precise report that has taken into account all the relevant considerations and factors that affect a property’s market value.
These considerations include:
- Location & nearby amenities
- Size of the land and structure
- Age, condition and build quality
- Design, storage, and energy efficiency
- Recent comparable sales
These valuations are incredibly thorough and may be used for other purposes, however, they only record the value at the specified valuation date. Market value is subject to change. As such, you should have an SMSF property valuation every 3 years as recommended.
Why choose us?
Melbourne Property Valuers Metro has been one of the top firms in the city since its early years. This can be credited to our world-class support and service as well as the fact that each of our valuers has more than 20 years of experience.
Clients choose and rely on us for SMSF property valuations as we are:
- registered property valuers
- an independent and professional valuation service
- members of the API and RICS – the most recognised professional valuation bodies
- known for exceptionally high-quality service at an affordable price
Frequently Asked Questions
Q: How often does SMSF property need to be valued?
There is no requirement to have a formal independent valuation of your SMSF property. However, it is recommended, particularly if an asset takes up the majority of your fund, to complete a valuation at least once every 3 years.
Q: What is the 5% SMSF rule?
An SMSF cannot hold a level of in-house assets that surpasses 5% of its total assets. This is measured using the market value of all fund assets including property which is assessed at the end of each fiscal year. If you exceed the 5% limit, a plan will need to be written and implemented by the following year.
Q: What is the average SMSF value?
Looking into the statistics provided, in the financial year of 2019-2020, the median SMSF asset allocation for residential properties was $466,156. For non-residential properties, it was $620,000.
Q: What is the 10% rule for SMSF?
The 10% rule ended in 2017. When this rule was still in effect, those who earned 10% or more of their income from employment-related activities could not claim any tax deductions from their personal contributions to their self-managed super fund.
Q: Who can value an SMSF property?
An SMSF property should be valued by an independent party. They cannot be the owner of the fund, a member or a relative of either. It is recommended that all property valuations are conducted by an experienced expert that has been certified by the API.
Call an SMSF valuation specialist today!
The Melbourne Property Valuers Metro team can help you connect with a valuer who specialises in SMSF reports. Call today to make a booking, request a quote or for information.
You can reach us via our contact form or by calling (03) 9021 2007.