The Australian Taxation Office (ATO) has recently published 'Regulation 8.02B and evidence to support real property valuations' which outlines its evidence approach and requirements for real property valuations. The approach elaborates but generally accords with the ATO's previously published valuation principles. This paper explains the ATO valuation requirements for real property and other asset classes and situations.
1. When does the trustee need to provide valuations?
With superannuation reform and the duties imposed on trustees under superannuation law, market valuation is an integral part of self-managed superannuation fund (SMSF) investment transactions, assets valuation and income activities.
- Regulation 8.02B of the Superannuation Industry (Supervisions) Regulations 1994 requires the assets of superannuation funds to be valued at market value when preparing the assets and financial statements of the fund.
- Market valuation is integral to determining the arm's length basis of SMSF transactions, especially when dealing with related parties (where permitted), for the purpose of Superannuation Industry (Supervisions) Act 1993 (SIS Act) section 109 investments and to avoid non-arm's length income (NALI) (section 295.550 of the Income Tax Assessment Act 1997).
- Market valuation is required to determine the account balances for pension commencement, determination of the transfer balance cap and total superannuation balance amounts and compliance with the 5% ceiling for in-house assets. These will affect the member's exempt current pension income (ECPI), eligibility for non-concessional contributions (NCCs), carried-forward NCCs and other measures (in the ensuing year) as well as the SMSF's use of segregated asset method to calculate ECPI.