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Jason G

Apr 16, 2024

Unlisted Trust Valuation

in SMSF Technical Forum

I am auditing a fund for FY23 that owns 50% of units in a unit trust. (Other 50% is owned by another unrelated SMSF).

The unit trust has a property and cash in bank. The property was recorded at cost in the trust financial statements.

Value Per Unit Trust Financial Statements

Property (At Cost): 350,000 Cash: 10,000 Total Assets: 360,000 Liabilities: Nil Net Assets: 360,000

However, the property in the unit trust sold in August 2023, for $550,000. In my opinion, the correct market value of the trust is: Market Valuation Property (Market Value): 550,000 Cash: 10,000 Total Assets: 560,000

Liabilities: Nil Net Assets: 560,000

Is it correct to say the SMSF should value their unit trust investment per the second calculation, rather than what was reported in the unit trust financial report?

1 comment

Comments (1)

THE AUDITORS INSTITUTE

Apr 16, 2024

Hi Jason

The standard approach to value a SMSF investment in a Unit Trust similar to what you are referring to is to use option 2. That is, you have to value the assets of the Unit Trust at market value and base the unit price in the Fund's financial statements on this.

Given the property sold in August 2023 it is reasonable to assume that this is a fair representation of the value of the property as at 30 June 2023.

If option 2 is not used there would be a breach of SIS Regulation 8.02B of SIS that requires per the audit report that:

"When preparing accounts and statements required by subsection 35B(1) of SISA, an asset must be valued at its market value".

Thanks

The Auditors Institute