SMSF Property Valuation Q & A

Accountant Question

The Smith Family Super Fund has a commercial property that was valued independently in June 2023 and we are wondering what the valuation guidelines are. Does the property have to be properly valued every year or can be valued just once every three years and then the trustee affirm that valuation.

AI SMSF Strategists Response

** if you would like a five day trial of this white label clone of Grant Abbott - contact grant@grantabbott.com for quick access.

✅ Short Answer

No, SMSF trustees are not required to obtain a formal external valuation every year. However, the property must be valued at market value each financial year, and the valuation approach must be evidence-based, justifiable, and documented.

📚 Legal and Regulatory Framework

1. SIS Act and SIS Regs

• Under SIS Reg 8.02B, assets must be valued at market value for reporting purposes, such as the fund’s annual financial statements and for calculating members' total superannuation balances.

• Trustees are responsible for ensuring the valuation is “based on objective and supportable data”.

  
  

2. GS 009 – Auditing SMSFs (AUASB)

• GS 009 requires the SMSF auditor to assess whether the valuation is reasonable, especially for significant assets like real property.

• It confirms that external valuations are not required every year unless:

  • the property market has fluctuated significantly,

  • the property has been improved or deteriorated materially,

  • or there is a dispute or challenge to the fund’s financial position.

    
    

3. ATO Guidance

• The ATO accepts a trustee valuation supported by evidence — e.g., a real estate agent’s appraisal, comparable sales, rates notices, rental yield data, or independent valuation.

• The ATO recommends a formal external valuation at least every three years for commercial property — but annual updates based on market evidence and trustee affirmation are acceptable in intervening years.

• 
  

🛠 Practical Application for Commercial Property

Year 1 – Formal Valuation 2023 Income Year

• Obtain an independent valuation by a certified valuer.

• Use this to set the baseline and support auditor sign-off.

Years 2–3 – Trustee Affirmation

• Trustees can use:

  • Comparative sales data,

  • Rental income analysis,

  • A letter from a real estate agent,

  • Market trend reports.

• Record the rationale and keep documents on file for the auditor.

🔒 Tip: If the value changes materially (e.g., significant renovation, rezoning, COVID market shifts), a formal revaluation is advisable — even within the 3-year window.

⚖ Risk Management & Strategy

• Auditor and ATO scrutiny is intensifying, especially for large SMSF balances and property-heavy portfolios.

• Documented valuation process helps mitigate SIS breaches and Division 296 impacts if TSB exceeds $3 million.

• For leading member SMSFs or family funds with intergenerational assets, ensure valuation policy is aligned with estate planning, including future benefit payments and member exit strategies.

  
  

✅ Recommendation

Set a formal SMSF valuation policy in the fund minutes:

• Formal external valuation every 3 years.

• Trustee-supported annual review using market data.

• Keep records for 10+ years in line with audit obligations.