For something like listed shares, that's straightforward, there's a ready market and a clear price. Property is a different story. It doesn't have a daily quoted value, so trustees need to do a bit more legwork to arrive at a figure their auditor will accept.
It's the trustee's job to value the asset, not the auditor's
Trustees are responsible for determining the market value of the fund's assets. Once the annual financial statements are prepared, the fund's auditor needs to see objective, supportable evidence behind that valuation, not just a number that sounds about right.
One option is to bring in a qualified independent valuer. This is worth considering seriously where the property makes up a significant chunk of the fund's total value, or where it's the kind of asset that's genuinely tricky to value.
If a property represents a large share of your fund's balance, an independent valuation is often the simplest way to remove any doubt at audit time.
If you're not using an independent valuer
- Recent comparable sales, generally at least three, and genuinely comparable in size and location
- A real estate agent appraisal that also references comparable sales
- Net income yields for commercial property, though this alone usually isn't enough evidence on its own
The ATO's Guide to valuing SMSF assets has some useful detail if you want to check exactly what's expected for your situation.
Leasing to a related party comes with extra scrutiny
If your SMSF holds property that meets the business real property definition, it's possible to lease that property to a business run by a member or a related party. That's allowed, but it doesn't mean the fund can charge whatever rent it likes.
Any rental arrangement with a related party needs to sit on arm's length, commercial terms. A useful way to think about it: would these exact lease terms be agreed to if the tenant were a complete stranger?
Auditors aren't just checking that rent is being paid, they're checking that the terms would hold up if the tenant had no connection to the fund at all.
- A properly documented lease
- A rent appraisal from when the lease was first entered into
- Evidence the arrangement is actually operating in line with the lease terms
- Where a previous lease term has expired, evidence the rent has been reset to market value, supported by a fresh appraisal
Why it pays to start early
The 2026 financial year audit might still be some months off, but the trustees who find the process smoothest are the ones who start pulling this evidence together now, rather than waiting for the auditor to come asking.
This is really just an extension of good record keeping. The same discipline that makes bookkeeping for a business straightforward, keeping documents organised and up to date as things happen rather than after the fact, applies just as well to an SMSF. A fund with tidy records and a folder of appraisals, leases and comparable sales ready to go tends to sail through an audit with far fewer questions.
A little preparation now saves a headache later
Property valuations and related-party leases are two of the areas SMSF auditors look at most closely, and they're also two of the easiest to get ahead of. Gathering appraisals, documenting leases properly and keeping evidence current throughout the year makes the audit itself a formality rather than a scramble.
If you're not sure whether your fund's current property evidence would satisfy an auditor, it's worth checking now rather than waiting for audit season. Contact Trekk Advisory to talk through what your fund might need.
This article is general information only and does not take into account your personal circumstances. Please contact Trekk Advisory to discuss how these requirements may apply to your SMSF.
