Focus on market value valuations for SMSF assets
The rules surrounding valuations for SMSFs have seen a range of changes over the past few years and it's vital that practitioners are across the various requirements to ensure their clients are legally protected.
Prior to 7 August 2012, trustees of SMSFs had no legal obligations to value their fund assets at market value, unless the fund was paying a pension and although SMSFs were encouraged to use market value for the purpose of preparing financial statements, it was not a legal requirement.
SIS Regulation 8.02B came into force on 7 August 2012, this amendment requires trustees to value each fund asset at its market value when preparing the annual financial statements of the fund.
Market value is defined in the SIS Act as being “the amount that a willing buyer of the asset could reasonably be expected to pay to acquire the asset from a willing seller if the following assumptions were made:
i.) That the buyer and the seller dealt with each other at arm's length in relation to the saleii.) That the sale occurred after proper marketing of the asset;iii.) That the buyer and the seller acted knowledgeably and prudentially in relation to the sale."