Date of article: 21 December 2018
Last updated: 21 December 2018
There were two recent cases where SMSF auditors were found to be lacking in their assessment of the value of investments stated on the financial accounts.
The trustee should be able to provide, and the auditor should request, evidence of market value of SMSF’s investments. The auditor’s role is not to determine the market value, but to have sufficient appropriate evidence to support the values stated in the SMSF’s financial accounts.
The market valuation of an investment is required to be based on objective and supportable evidence. In certain case, the auditor will wish to review the method in arriving at the market value.
Typically, investments with no readily available market will be more difficult to determine the market value, and attract the auditor’s and Australian Taxation Office’s attention.
For example, a SMSF has made an unsecured loan and the borrower has recently missed making a repayment. The difficulty in valuation arises whether to continue to state in the SMSF’s accounts the market value of the loan at the outstanding loan amount or recognise an impairment charge.
Following the two recent cases, SMSF auditors will increase their scrutiny of certain investments made by a SMSF, typically, private investments - such as private loans and unlisted private company or trust.
Reference:
Ryan Wealth Holdings Pty Ltd v Baumgartner [2018] NSWSC 1502
Cam & Bear Pty Ltd v. McGoldrick [2018] NSWCA 110
Do you need help with your situation or if you wish to discuss the above, please contact us. Our contact details.
