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Further to my earlier post which related to a Member Selling it's interets in a unit which is part of the Mantra Group in the Crown Towers Qld confirming my opinion that it was "business Real Property, therefore allowed under SIS, the transfer has now been completed but my dilema now is the "valuation aspect". In NSW, any trasfers between "related parties" needs to have the value of the property being transferred, valued by an independant valuer for Stamp Duty purposes. This would satsify the SMSF Auditor that property was purchased a correct market value. Apparently in Qld, there is no need to obtain a valuation. Solicitor has provided copy of Transfer duly stamped by the Qld OSR. As Auditor, would it be prudent to accept this as confirmation of "market value" of the transfer or should I insist on a formal valuation by an independant valuer, as is the case with the NSW OSR requirement? The latter is obviously a cost to the Fund, something which I'd like to avoid, but I feel I need something more solid to confirm the valuation of the property being transferred.
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Hi Gino
The answer is the trustees should get an independent valuation even if there is no legal requirement to do so. My view is you should insist on an independent valuation if you are not satisfied with the basis on which they have established the value of the property.
The ATO provides guidance on SMSF & valuations at:
Given that the Fund is acquiring the asset from a related party preferably there is an independent third party valuation.
Technically in your example the trustees are not required to get an independent third party valuation however as per the ATO they will need to provide documentation to the auditor that the:
"valuation has been arrived at using a 'fair and reasonable' process. Generally, a valuation is considered fair and reasonable where it meets all the following.
it takes into account all relevant factors and considerations likely to affect the value of the asset
it has been undertaken in good faith
it uses a rational and reasoned process
it is capable of explanation to a third party."
As an example if the trustees could provide evidence of a recent sale of a similar property that supports the valuation this may be a reason to not need an independent third party valuation.
The ATO highlights that acquiring property from a related party may be a reason that requires trustees to consider an independent third party valuation and they state:
"You should determine the market value of the acquired asset based on objective and supportable data.
Consider using a qualified independent valuer if either the:
value of the asset represents a significant proportion of the fund's value
nature of the asset indicates that the valuation is likely to be complex or difficult.
An approved SMSF auditor can seek an independent valuation of the fund's investments, as part of their audit and assurance engagement."
If other members have a view please let us know.
Thanks
SMSF AAA