Raine and Horne Commercial

13 Commercial Insight July 2020 Self Managed Super Fund Property Assessments Acumentis National Director – Commercial, Paul Robbins answers some important questions around self managed super fund asset valuations and how these are being affected by COVID-19. Paul outlines the key compliance considerations for trustees in valuing property assets within their fund, why now is a good time to review assets and how Acumentis’ SMSF assessment product effectively addresses the needs of trustees. What are the key compliance considerations for trustees when it comes to valuing property assets within their super fund? SMSF managers must prepare annual financial accounts and statements including a valuation of any property assets to confirm a fund has complied with relevant super law. Fund assets are to be valued at their market value at 30 June each year. When it comes to valuing property assets, the two most important considerations for trustees are the valuation approach adopted and the timing of the assessment. Having objective and supportable data demonstrating market value and the valuation methodology used will enable compliant reporting. The ATO recommends funds consider the use of a qualified independent valuer if the value of the asset represents a significant proportion of the fund's value or, the nature of the asset indicates that the valuation is likely to be complex or difficult. What are some of the common hurdles SMSF trustees encounter when ge ing real estate assets valued? A common hurdle encountered is gaining access to current and relevant supporting data to demonstrate market value comparison. The cost and timing associated with obtaining third party advice in relation to this task however is often the biggest hurdle. Acumentis has developed a new product designed to overcome this in a timely and cost effective way. When should trustees be considering a revaluation of SMSF owned property, especially given current market volatility due to COVID-19? In line with reporting requirements fund assets should be valued at 30 June each year. ATO guidance recommends that a trustee should consider an external assessment after a significant event which may include macro-economic events, market volatility or a natural disaster. Acumentis believes that COVID-19 could be considered a significant event and recommends that trustees take this into consideration when preparing this year’s financial reports. Have property values suffered a correction as a result of the crisis, and how are they likely to be affected in future? We have observed a pause in market activity with transaction volumes down. The length of the pause will determine the degree of impact across the various markets. Tenant demand is anticipated to be subdued for some time and this will impact values initially, through increased le ing up periods and incentives. It’s too early to comment on yield spreads with mixed results being seen across transactions that have occurred. What we can say is that effects will vary across asset classes and sectors, and between individual properties. Are there any issues for valuers in predicting the value of these assets, given the current uncertain economic outlook? The two main drivers of value in commercial property are rents and investment yields. Valuers are currently monitoring the markets to determine if there are any signs that market rents are falling in in the various sectors as falling rents will result in value reductions. We are also closely monitoring whether the risk appetite of investors have changed. If particular asset classes are deemed higher risk investors will look for a higher investment yield, which will impact values. With trustees under constant pressure to fulfil ATO regulations in managing their SMSF, how does the Acumentis SMSF assessment assist trustee’s? Acumentis provides the detailed market data and methodology required to comply with ATO reporting and super law requirements. Our national team of registered valuers bring a wealth of expertise, local and asset specific knowledge and insights to the process that may be missed if using other third party providers Acumentis delivers SMSF assessments in a timely and cost effective manner. Assessments are delivered within two business days from receipt of a compliant engagement form, which is easily completed online. SMSF assessments are available for residential, commercial, rural and agribusiness properties starting at $200 + GST for residential properties and $500 + GST for commercial property. Complex properties, rural and agribusiness are undertaken on an individual quotation basis. For assistance with SMSF property assessments contact Acumentis on 1300 882 401 or visit Acumentis .com.au