Assets in a super fund must be revalued every year so that the superannuation fund’s financial statements give a snapshot of the value of your fund and your members balance at 30 June.
This is an ATO requirement for all superannuation funds.
All asset get revalued.
Listed shares are shown at the market price as at 30th June and your accountant will get this information from the share registries.
Private Company (unlisted) Shares
Private company (unlisted) share valuations usually come from the company’s financial statements for that year. The share value will usually be the net assets of the company (assets – liabilities) divided by the number of shares in the company. If your super fund has shares in a private company the company accounts will need to be completed before the superannuation fund accounts are prepared.
This value could also come from a private valuation prepared by a professional whose value the ATO is happy to rely on.
Value of Units in a Managed Fund
The value of units in a managed fund will be advised in the annual reports they provide. These reports are usually sent to investors in September but can be released as late as November. Your superannuation fund cannot be completed until this report becomes available.
Commercial and Residential Property
Commercial and residential property can be valued by an official valuer, however it is probably more practical to do a trustee valuation.
A trustee valuation is where you, the trustee look at other similar properties in similar locations and base your valuation on what they are selling for. You can compare this value with the amount of rent you are receiving as long as you are renting the property to a 3rd party who is not related to you.
If you are leasing office space to your own company I would not recommend this as usually the rent itself is justified by the property valuation to try to stop people funneling money into their superannuation fund which pays tax at 15% and getting a tax deduction in their business at 30% if it is a company or up to 49% if you are using a trust or are a sole trader where the money flows ends up in your personal tax return. You would be looking at a yield of around 7 – 8%.
All Other Assets
For all other assets the method of valuation will depend on whether there is a ready market for the asset. Gold and silver, for example, have a market where we can look to see its value at 30 June. For more unusual items such as cattle, it is quite different. It is not practical to weigh all of the cattle at 30 June and multiply it by a rate. It is more subjective and a trustee valuation, with evidence to support the value, is more appropriate.
Is there tax payable when an asset is revalued to a higher value? No.
Superannuation Fund Revaluation of Assets
Lucy has purchased a rental property in her superannuation fund for $400k.
At 30 June Lucy took into consideration that 2 identical units in the same building had just sold for $420k. She let her accountant know that as the trustee of her super fund, she believed her property to be worth $420k.
In Lucy’s superannuation fund financial statements the property would be shown at its new value of $420k. Lucy has not actually received the $20k of increased value in the property so the fund will not need to pay tax on it. This $20k will be shown in the financial statements in an Asset Revaluation Reserve.
If you have a background in accounting the journal to revalue the property would be:
Why, then, if there are no tax consequences of revaluating the assets of a superannuation fund each year do the ATO make us do it?
The value of the market value of the assets in a superannuation fund affects the minimum and maximum amounts that someone over the age of 55 can take out if they have a transition to retirement pension or if you have in house assets inside of your superannuation fund.
- If you have shares in a private company or units in a private unit trust try to have the accounts prepared in July, which is before most businesses are ready for their accountant to start preparing their work (August starts to get crazy!). This will let your superannuation fund accounts be prepared in the time frame you probably have in mind.
- For any unusual assets you might have, talk to your accountant now about what you might need to provide them at the end of June. There may be some leg work you can do now to save you time later in the year.