Top 3 asset valuation areas that trigger audit issues

Written By Peter Gallagher

Accurate asset valuations are one of the most common pressure points we see when auditing self managed super funds (SMSF). While trustees and advisers may believe their documentation is sufficient, small technical oversights can quickly escalate into compliance issues, causing delays, and unnecessary back-and-forth with the auditor.

With increased scrutiny from the ATO, ensuring valuations meet the required standards has never been more important.

Below are the key areas where valuation errors frequently arise, and our tips on how to avoid them.

1. Property Valuations

Property remains one of the most scrutinised SMSF assets. To meet compliance requirements, valuations must:

  • Be referenced to 30 June of the relevant financial year

  • Be supported by recent sales evidence within 6 months of the balance sheet date

  • Clearly state the date the appraisal was performed

For residential property, an RP Data or CoreLogic report is acceptable, and can be sourced for free through platforms such as Class and BGL 360.

For commercial property, if comparable sales are not available, a rental yield approach may be used. The appraisal should include market rent assessed within six months of the balance sheet date, supported by recent leasing evidence, and apply a capitalisation rate based on current market data.

It’s important to note: the ATO has indicated that unchanged valuations year-on-year are likely to be non compliant, and data validation checks are actively being conducted on this basis.

Common property valuation mistakes to look out for:

  • No valuation date included

  • Sales evidence not provided

  • Evidence outside the 6-month window

  • Valuation identical to prior year without justification

  • Valuations not reviewed by the accounting firm before audit submission

2. Private Investments

Private investments require careful documentation. Unlike listed assets, they do not have readily observable market values, which means trustees must take additional steps to substantiate the reported value.

Auditors will look closely at the methodology used, the assumptions applied, and the supporting evidence to ensure the valuation is reasonable and compliant.

To support compliance:

  • Valuations must be within 6 months of 30 June of the relevant financial year

  • Recent sales evidence should be provided to support valuations

Where valuations and sales evidence aren’t available, documentation should include:

  • A discounted cash flow (DCF) calculation, or

  • A capitalisation of earnings approach

Capitalisation rate and discount rates must be supported by third party evidence to demonstrate they match market rates, and earnings must be supported by audited financial statements.

Common Private Investment Mistakes to look out for:

  • No supporting documentation provided

  • Assumptions not evidenced

  • Trustees unaware of valuation requirements

  • Significant audit delays due to incomplete records

3. Loans Made by the SMSF

While lending arrangements may appear straightforward in practice, loans carry significant compliance risk if not properly structured and documented.

From an audit perspective, the key question is simple: is the loan both genuine and recoverable?

Without clear documentation and proof of repayment capacity, lending arrangements can quickly become audit issues.

To support compliance:

  • A signed loan agreement must be provided

  • If the loan is secured, provide the security document or title deed and supporting asset valuation

  • If the loan is unsecured, provide evidence the loan has been repaid or that the borrower has capacity to repay

Common Loan Mistakes to look out for:

  • No formal loan documentation

  • Repayment terms not adhered to

  • Loans extended without supporting evidence

  • No evidence of recoverability

Most audit issues arise not from deliberate non-compliance, but from incomplete documentation or misunderstandings on valuation evidence required.

Ensuring valuations are dated correctly, supported by recent and relevant evidence, and reviewed before being provided to the auditor can significantly reduce delays, audit flags and regulatory risks.

At Super Green Tick, we prioritise clear guidance around documentation requirements and current ATO focus areas, ensuring our clients are prepared well before the audit process begins. This proactive approach significantly reduces the risk of compliance issues and allows us to deliver audits within the fast turnaround timeframes our clients expect, with minimal back-and-forth.

Peter Gallagher