ATO investigating 16.5k SMSFs over valuation compliance
More than 16,500 SMSFs are being scrutinised by the ATO as they allegedly reported certain classes of assets at the same value for at least three income years.
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These assets include residential and commercial property, unlisted companies and unlisted trust investments.
Additionally, the regulator said there were more than 1,000 SMSF auditors associated with this high-risk population and its data reveals no auditor contravention reports (ACRs) were lodged for potential breaches of the market valuation rules for the assets.
The ATO is increasingly using data to identify and deal with risks and has recently identified a number of funds that have maintained the same values on reported SMSF assets in their annual return.
It stated there are concerns these funds may not be meeting their legal requirement to value and report their assets at “market value” every year.
The regulator has now started to send targeted messages to trustees and auditors about this obligation and will be monitoring the approach taken by the funds in their next annual return.
The ATO has reminded SMSF trustees that they must value their assets each year and provide supporting evidence to their auditor.
The regulator said a key responsibility of trustees every income year is valuing their fund's assets at “market value” and before lodging the fund’s annual return, the retained auditor is required to check the assets have been valued correctly and assess and document whether the basis for the valuation is appropriate.
The ATO said trustees should be aware that if their asset valuations fail to meet the valuation requirements, the fund and members may have additional tax to pay and they could be liable for administrative penalties.
Additionally, as part of the annual audit process, trustees must provide objective and supportable evidence to their SMSF auditor to support the valuation of their fund assets. This includes providing all relevant documents specifically requested by the auditor.
Keeli Cambourne
26 March 2024
smsfadviser.com