Audit-ready valuations for SMSF-held businesses and unlisted assets.

An SMSF business valuation establishes the market value of unlisted shares, units or business interests held by a self-managed super fund, as regulation 8.02B of the SIS Regulations requires for the fund's accounts each 30 June. Prismi prepares independent, audit-ready valuations built on the objective and supportable evidence the ATO's SMSF valuation guidelines describe — with an annually repeatable methodology so next year's audit is not a fresh argument.

Why your fund's auditor is asking for more this year

Regulation 8.02B of the Superannuation Industry (Supervision) Regulations requires every asset in an SMSF's financial statements to be reported at market value, every income year. For listed shares and cash that is trivial. For unlisted shares in a private company, units in an unlisted trust, or a direct interest in an operating business, the trustee must determine a market value based on objective and supportable data — and the approved SMSF auditor must obtain sufficient appropriate evidence to verify it. Trustees are permitted to determine the value themselves, but the evidence standard does not soften because the valuer is the trustee. Where the fund holds an interest in a private business with goodwill, the practical way to meet that standard is a documented business valuation. The same value also feeds pension commencement balances, the in-house asset ratio and member benefit calculations, so an unsupported figure rarely fails in only one place.

What "objective and supportable evidence" actually means

The ATO's valuation guidelines for self-managed super funds name the evidence it considers capable of supporting the market value of unlisted shares or units: an independent expert valuation of the entity or its underlying assets; documentation showing how the directors or trustees determined the value, including the method used, the data relied on and the assumptions made; the date and price of a recent sale of the same shares or units between unrelated parties; or, where property is the entity's only asset, a valuation of that property. The definition of market value in the SIS legislation mirrors the willing-but-not-anxious principle from Spencer v Commonwealth and the Market Value basis in IVS 104 — a hypothetical arm's length exchange after proper marketing, not a number that suits the fund. Auditors are instructed to verify the valuation against that standard, and where they cannot, to modify the audit opinion and consider lodging an auditor contravention report with the ATO.

Why signed declarations and last year's numbers are being knocked back

A trustee minute asserting a value, a one-line declaration from the investee company's directors, or the net asset figure lifted from financial statements one or two years old is an assertion, not evidence. The auditor's role is not to value the asset — the ATO is explicit about that — but the auditor cannot sign off on a value with no visible method or data behind it. The common shortcuts all fail the same way: historical cost tells the auditor what was paid, not what the interest is worth now; the net tangible assets of a trading company ignore goodwill entirely; a unit price struck at the last capital raising says nothing about the current year; and a directors' declaration without workings is circular where the directors and the trustees are the same people. SMSF auditors are themselves under ATO and ASIC scrutiny for accepting exactly this material, which is why files that passed for years are now coming back with questions.

What the auditor's workpapers need to show

A well-built valuation is designed to keep the audit conversation short. We prepare the report so the auditor's file can evidence each of the points the ATO's guidance directs them to check:

• ·The valuation method selected and why it suits the entity — earnings-based for trading businesses, asset-based for passive holding entities, with rejected methods reasoned
• ·The financial statements and management accounts relied on, identified by date, brought up to the 30 June valuation date
• ·Normalised earnings analysis with an add-back schedule and evidence for each adjustment
• ·How goodwill was assessed for operating businesses — the gap most NTA-based figures ignore
• ·Discounts for lack of control or marketability on minority parcels, with documented reasoning for the quantum
• ·The concluded value, the supportable range around it, and the key assumptions
• ·An independence statement and senior-reviewer sign-off, with the working file retained for 10 years

A valuation designed to be repeated every 30 June

Regulation 8.02B is an annual obligation, but the ATO's guidance does not demand a full external valuation of every asset every year — it demands that the reported value be objective and supportable each year. Our SMSF engagements are structured for that reality. The base-year report establishes the methodology, the normalised earnings base, the multiple or capitalisation rate and the supportable range — and documents the update triggers and materiality thresholds for future years: material changes in trading performance, capital transactions in the entity, arm's length sales of the same shares or units, loss of key contracts or customers, and shifts in the entity's asset composition. In a year where no trigger fires, an update engagement rolls the valuation forward using the same documented framework with refreshed inputs. The auditor sees a consistent method year on year instead of a new argument, and the trustee's annual compliance cost falls accordingly.

Related-party acquisitions and NALI — we flag it, your adviser rules on it

Two adjacent regimes make SMSF valuations higher-stakes than the accounts alone. Section 66 of the SIS Act generally prohibits a fund acquiring assets from related parties, with limited exceptions — including business real property acquired at market value and in-house assets within the 5% market value ratio — so an acquisition-date valuation is often the document that keeps the exception available. Separately, the non-arm's length income rules in s 295-550 ITAA 1997 can tax income from a non-arm's length arrangement at the top marginal rate of 45% rather than concessional super rates, and a mispriced related-party transaction is a common trigger. Prismi's role is the market value: an independent, documented figure at the relevant date. Whether s 66 permits the acquisition, and whether NALI applies, are questions for the fund's accountant or SMSF specialist adviser — we are not a registered tax agent and do not provide tax, legal or financial advice. Where the facts raise a feature the adviser should examine, we flag it in the report.

Tier recommendation

For a fund holding a single unlisted business interest, the base-year valuation typically sits at the Comprehensive tier (from $3,995 + GST, 15–25 business days). Annual update engagements in years with no trigger events are generally at the Essential tier (from $1,495 + GST, 10–14 business days). Additional entities are $750 each. Where the interest is large relative to the fund, a related-party acquisition is planned, or the value has previously attracted auditor qualification, the Defensible Valuation File (from $8,995 + GST, 25–35 business days) is the right level. A 30 June date that has already passed adds the $495 retrospective surcharge per historical date, and rush turnaround for audit deadlines is available at +30% of the base fee, subject to capacity. Fees are fixed at engagement and never contingent on the outcome.