Potential ATO crackdown on valuations of assets in superannuation funds

As previously mentioned in previous articles on our website, far-reaching changes have been made to the superannuation system with many changes taking effect from 1 July 2017. The most significant change is the introduction of the $1.6 million transfer balance cap which will restrict the balance of superannuation a member can commute from accumulation to pension phase. However, the imposition of this legislation brings with it some practical considerations for Trustees of Self-Managed Superannuation Funds (SMSF) in particular the revaluation of assets at 30 June 2017.

Trustees of SMSFs are required to consider the value of the assets in the fund each year. However, the Australian Taxation Office (ATO) has previously indicated that this does not mean an external valuation is required for all assets each year. The ATO has indicated that for assets such as listed securities and cash as revaluations are relatively easy to undertake these assets should be revalued annually. However, in respect of real property a valuation is required for a year only in situations where a significant event occurred that may have altered the asset’s value since it was last valued.

However, given the implications from 1 July 2017 for a member’s ability to make non-concessional contributions and the $1.6 million transfer balance cap, it is potentially now crucial for Trustee’s to obtain market valuations. Accordingly, auditors will be especially vigilant when checking the accuracy of valuations in respect of the year ended 30 June 2017. It is also to be expected the ATO will pay closer attention to asset valuations this financial year and going forward.

Trustees that fail to comply with the changes in legislation may face administrative penalties, and individual trustees and directors of corporate trustees are personally liable to pay any administrative penalties incurred. The penalty for failing to comply with the revaluation of assets is up to 10 penalty units and a fine of up to $1,800 on each trustee.

If you have any concerns or wish to discuss these superannuation reforms in more detail please contact your Walker Wayland NSW advisor.