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I have an interesting one. Our audit client (a partner in an accounting practice) has transferred an interest in a commercial building (where the accounting practice is run from) which was owned by 6 equity partners in a GST partnership via their respective trusts. That part is fine - business real property confirmed.
The legal agreemnt was drawn up using a property valuation from a well known/established commercial real estate agent using a combination of the summation method and capitalisation method of valuation and the transfer arranged using that valuation.
However, when sent for stamping the stamps office refused to accept the valuation, doing their own and coming up with a valuation $157,000 higher than the agent. Whilst the client initially objected to this, in the end they just paid the stamp duty and moved on.
So, the issue, the super fund has paid the lower amount, in accordance with the estate agent valuation AND the legal agreement drawn up.
The accountant for the fund has asked my opinion as to whether the additional amount should be paid in order to satisfy the stamp duty valuation and, as they haven't paid it yet, whether that amount should have interest accrued on it until payment is made. Your thoughts would be appreciated.
If the commercial real estate agent is a registered valuer I would like to know why that valuation is not acceptable for the purposes of the property transaction over the stamp duty office?
Hi Lynda
If I understand the issue, higher stamp duty has been paid but the extra amount was not paid by the Fund. If this has occured then yes the extra amount should be taken up as payable by the Fund as it is its liability.
I assume the extra stamp duty is approximately $8,000 and on that basis I would not take up interest owing based on it not being a material amount (assuming not a long time has elapsed since it was paid).
The auditor may be concerned about the original valuation so ideally you would review the valuation for being reasonable re the initial valuation and review on what basis the State Revenue Office came up with a higher valuation.
If the correct value was not paid by the Fund for the property you may have a breach of section 109 of SIS (arm's length transactions) and have NALE (non arm's length expenditure) issues.
Thanks
The Auditors Institute