In a landscape where the Australian Taxation Office (ATO) is enhancing its focus on the compliance of Self-Managed Super Funds (SMSFs) with market valuation requirements, in this week’s edition of Feeling Smarter, Aaron Dunn and Tim Miller delve into the intricacies of this compliance issue, providing a comprehensive understanding and actionable advice for trustees and auditors.
The heart of the ATO’s compliance activity is a concerted effort to address SMSFs that have not updated the market valuations of certain asset classes for over three years. This focus particularly zeroes in on real property and private companies and unit trusts – a move that signals the ATO’s intent to clamp down on compliance breaches. With data and analytics at their disposal, the ATO has identified approximately 16,500 SMSFs, represented by around 1,000 SMSF auditors, that have potentially failed to meet the market valuation requirements set out in regulation 8.02B.
This activity emphasises the significance of accurate and timely asset valuation, not just for compliance with annual return obligations, but for its wider impact on aspects such as total superannuation balance (TSB), non-concessional contributions (NCC), and transfer balance cap (TBC). Valuations influence a range of superannuation-related decisions and the potential tax and penalty implications for SMSFs that fail to meet their obligations can be significant.
Referencing SMSF auditors highlights the ATO’s expectations for auditors to scrutinise the consistency of asset valuations over time. The necessity for auditors to query repeated asset figures over a three-year period, prompts a deeper examination of whether SMSFs are fulfilling their valuation duties. This scrutiny not only serves to ensure compliance but also to safeguard against the risk of administrative penalties and additional tax liabilities for SMSFs.
Whilst this current focus is on valuations, it extends to the broader responsibilities of SMSF trustees and auditors in ensuring compliance with the ATO’s guidelines and underscores the importance of documentation and the proactive engagement of SMSF clients in addressing valuation and compliance issues. Falling into the ATO’s “please explain” category could pose significant challenges for SMSFs, especially as the end of the financial year approaches, making it a pivotal time for trustees to revisit and address any valuation concerns.
In conclusion, the analysis of the ATO’s recent focus on SMSF asset valuations serves as a critical reminder of the importance of compliance in the evolving regulatory landscape.
Through Smarter SMSF’s upcoming tax planning session, Aaron and his team aim to equip SMSF trustees and professionals with the knowledge and tools needed to navigate these challenges effectively.
