SMSF warns ATO is focusing on rating disclaimers

Daniel Butler


The ATO is now scrutinizing valuation terms that may increase the SMSF’s risk in relation to non-arm’s length income, warning professional counsel.

At a recent Tax Institute event, Daniel Butler, director of DBA Lawyers, said the ATO pays close attention to the finer details of its assessments, so the SMSF needs to be very accurate in this area. said.

“We’ve received comments from ATO officials saying they don’t intend to accept valuations by independent appraisers because they come with disclaimers, or they want us to delve into them in expert reports,” Butler said.

Butler said he has seen other cases where the ATO accepts evaluations but does not accept the terms of the evaluations.

The SMSF therefore needs to be very careful in its assessments, especially where there is a risk of non-arm’s length income being applied, he warned.

He also recommended that SMSF professionals and their clients ask raters to provide accurate ratings rather than ranges.

“You may get a property valued between $1 million and $1.1 million, but where do you land on that line when faced with an auditor? Why land in the middle? ‘ he said.

“Don’t ask them to provide a range. [deciding] Locations found within that range. “

According to Butler, the gold standard for evaluation is to obtain an independent registered evaluation opinion.

“Make sure your appraiser is properly briefed and has a fair and reasonable valuation methodology,” Butler said.

“I need to check the ratings as there are no comparable properties and some ratings are just ridiculous.”

Butler said that given the retroactive application of the non-arm’s length income provisions, in some cases the SMSF may have to go back and reassess the valuation of assets that were purchased long ago. rice field.

“If you have past valuations where practices were a little looser, such as relying on curbside valuations, you’ll have to go back and fill them in because the law is retroactive,” he said.

“So it doesn’t matter what you bought in 2000. If the ATO claims it was acquired undervalued, it’s NALI’s fault.”

Jemma Sanderson SMSF auditors, Director of Cooper Partners Financial Services, said many of these issues were to blame, given several recent lawsuits.

“It makes sense that they would be overly cautious about the value of the deal and reluctant to approve it even if the financial statements are exaggerated,” Sanderson said.

SMSF warns ATO is focusing on rating disclaimers

Daniel Butler

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Last updated: December 8, 2022

Publication date: September 20, 2022


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