Two recent court decisions have highlighted the SMSF auditor’s obligation to verify the SMSF’s asset values and disclosure in the financial statements.  The auditors were held liable for failing to adequately investigate the recoverability of investments and ultimately the value of those investments.


Your SMSF auditor will consider valuations of unlisted SMSF assets to be a higher risk area for the audit and will require documentation to support the valuation and recoverability of those investment held.  Examples of unlisted investments include units in an unlisted trust, shares in an unlisted company or loans made by the SMSF.  If sufficient and appropriate evidence to support the valuation of a significant investment is not able to be obtained, the auditor may need to qualify the financial and compliance report sections of the SMSF audit report advising they have been unable to obtain sufficient appropriate audit evidence on asset valuations.  If the contravention meets the ATO reporting criteria, they may also be required to lodge a contravention report with the ATO.

Why do assets need to be at market value?

Regulation 8.02B of the Superannuation Industry Supervision Regulations 1994(SISR) requires  assets to be valued at market value in the SMSF’s accounts and statements.   Interestingly, the ATO announced the most common contravention not identified or reported by auditors who were referred to ASIC [in 2018] was regulation 8.02B.

There are also other reasons why it is important to ensure asset valuations are up to date, including, but not limited to:

  • Determining the Total Super Balance of each member (which affects each member’s ability to make non-concessional contributions and ability to use the bring-forward-rule);
  • Determining the value of assets supporting a member’s pension which impacts on the minimum pension payment required:
  • Ensuring Members Transfer Balance Cap does not exceed $1.6m when moving assets from the accumulation phase to retirement phase; and
  • Ensuring any assets acquired or transferred (particularly from/to related parties) are at arm’s length

What evidence is sufficient?

The Trustee must provide the auditor with evidence that shows how the asset was valued, including the method used and the data on which the valuation relied. The ATO has stated that a statement in the trustee representation letter or a trustee minute confirming asset valuations is not sufficient audit evidence on its own.   The level of information sought will depend on the auditor’s assessment of risk which will generally increase with the value of the asset, or where the asset represents a larger proportion of total fund assets.   To assist Trustees further, the ATO have published Valuation Guidelines for SMSF’s.


Investing in unlisted investments can present greater audit challenges which is something SMSF Trustees need to consider before investing in this asset class.  This may also mean greater compliance costs associated with this type of investment.  If you have unlisted investments in your SMSF or are considering investing in an unlisted investment and would like further information to assist with meeting your SMSF audit obligations, please contact us on 03 52216399 or at

Disclaimer: this information is of a general nature and should not be viewed as representing financial advice. Users of this information are encouraged to seek further advice if they are unclear as to the meaning of anything contained in this article. Davidsons accepts no responsibility for any loss suffered as a result of any party using or relying on this article.