Superannuation tax changes demand accurate property asset valuations
Changes to taxation laws around high superannuation balances mean property investors need to get accurate property valuations to avoid potentially costly entanglements with the ATO.
Whether you agree or disagree with the proposed new tax on superannuation balances over $3 million, one thing is certain: if it becomes law, it will need to be paid.
Regardless of fairness debates, what you can control is how accurately your assets are valued.
The Federal Government’s proposed Division 296 tax would apply an additional 15 per cent tax on the portion of super balances exceeding $3 million, including unrealised capital gains. While the legislation is yet to pass, it’s widely expected to come into effect from 1 July 2025, and many experts are encouraging SMSF trustees to prepare now.
Because when it comes to Division 296, the numbers matter. A lot.
For many self-managed super fund (SMSF) trustees, their portfolio is a mix of equities, cash, and property, with property often making up a significant portion of the total value. Unlike listed investments, property doesn’t come with a daily price tag. And that’s precisely why engaging a qualified valuer is more important than ever.
With this new tax calculating liabilities based on unrealised gains, there’s now the very real risk that SMSF trustees could end up paying tax on a value that doesn’t truly reflect market conditions.
Overestimated values, whether unintentional or based on agent appraisals, could nudge your balance past the $3 million threshold and cost you significantly more than necessary in tax.
Ross Turner, General Manager of Australian Valuations at Opteon, explained the danger of inflated values.
“A significant number of SMSF property assets are leased to related parties operating their businesses from those premises.
“Under the proposed Division 296 tax, it’s critical that SMSF trustees ensure asset valuations and rental incomes genuinely reflect market conditions.
“Inflated rents can artificially boost property values, potentially pushing super balances above the $3 million threshold and triggering additional tax liabilities, including unrealised gains.
“Market valuations and market rent assessments are essential to navigate the evolving regulatory environment.”
This isn’t just a technicality, it’s a serious financial risk.
Audit risks around inaccurate valuations
Having an independent, substantiated market valuation can be the difference between paying tax on real value or paying tax on paper money that doesn’t exist.
What many trustees may not realise is that asset valuations have always been a requirement for SMSFs.
Each year, trustees must declare the market value of all assets in the fund. But until now, those values only affected financial statements, not the member’s tax position. That’s what’s changing.
Peter Economos, Managing Director at Blackwattle Tax, made this point clear.
“SMSF trustees must value each year the assets in their fund at market value.
“These values are used to prepare the financial statements and accounts.
The proposed changes to super may place pressure on SMSF auditors to scrutinise the valuations presented.
“It will become a critical priority for tax compliance each year for SMSF trustees to make sure the values they provide auditors will stand up to the scrutiny of an ATO audit under the guiding principles of valuing SMSF assets.”
The bottom line is this; having a properly prepared valuation by a qualified property valuer can give you confidence, help you stay compliant, and most importantly, ensure you’re not paying more tax than you should be.
I’ve had an influx of SMSF clients seeking valuations for exactly this reason. Not just because they have to, but because they understand the risk of getting it wrong. A formal valuation report provides clear, evidence-based market value, adjusted for condition, market trends, and comparable sales, not emotion or assumption.
This is not the time to rely on a rough figure or a letter from an agent. This is the time to make sure your valuation will stand up to scrutiny.
Because like it or not, this tax could become a reality. But paying more than you should? That’s something you can avoid, with the right valuation in hand.
