by Luke Quinnell
Self-Managed Superannuation Funds (SMSFs) are subject to strict compliance obligations. For trustees who hold property within their SMSF, one of the most important—and often misunderstood—responsibilities is ensuring the property is reported at its market value every financial year.
While many in the industry still refer to an outdated “three-year valuation rule,” property must be accurately valued at 30 June each year, and trustees must have objective, supportable evidence to substantiate that value.
What Is Legally Required
Superannuation legislation requires all assets of an SMSF, including real property, to be valued at market value when preparing yearly financial statements. (i.e. 30 June each year)
“Market value” is defined as the price that an asset could reasonably be expected to achieve in an arm’s length transaction. For property, the ATO requires this to be supported by objective and reliable data. A professional market appraisal from a real estate agent, or in some cases a valuation from a qualified valuer, is the most straightforward way to meet this obligation.
The Misconception About 3-Year Valuations
A common misconception persists that SMSF trustees only need to obtain a property valuation once every three years. This view stems from earlier industry practices and outdated guidance. The reality is different. The ATO requires property values to be updated every year for reporting purposes.
While the ATO acknowledges that a formal valuation by a certified valuer may not be required annually, trustees must still obtain evidence each year to support the reported value. This can include sales data, independent appraisals, or other reliable sources. Simply rolling over the same value for three years is not acceptable and will not satisfy an SMSF auditor.
With The Additional Tax On Super Balances Over $3million, This Is Critical
With the proposed introduction of Division 296 tax from 30 June 2025, accurate property valuations in an SMSF take on added importance. The $3 million threshold for the new tax is based on each member’s total super balance, which must reflect the true market value of all assets at year-end. If property or other assets are undervalued at 30 June 2025, and then later corrected to a higher value at the following 30 June reporting point, the increase is treated as growth in the member’s balance—even though it simply reflects a catch-up from the earlier understatement. This artificial “jump” can cause members to be pushed above the $3 million threshold and face additional Division 296 tax unnecessarily. For this reason, obtaining reliable, supportable valuations at 30 June 2025 is critical to ensure that the base position is accurate, fair, and does not lead to unintended tax outcomes in future years.
The Takeaway
For SMSF trustees, obtaining a market appraisal on property held within an SMSF is not an optional step or something that can be deferred for three years. It is a legal requirement, every year, under Superannuation regulations and ATO guidance.
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