Ask your Aspen advisor:
“Our SMSF owns property. What evidence should we have ready before the auditor asks for it?”
Property can be one of the biggest assets inside an SMSF. It can also be one of the assets that creates the most back-and-forth at audit time.
Unlike assets with a readily available market price, SMSF property needs to be supported by objective evidence showing its market value at 30 June each year, and the easiest time to gather that evidence is before the auditor asks for it.
How should SMSF property be valued?
Trustees are responsible for determining the market value of the fund’s assets.
For property, an independent qualified valuation may be appropriate, particularly where the asset represents a significant portion of the fund or is difficult to value.
If an independent valuation is not used, trustees need to support their figure with evidence from multiple sources.
That could include:
- at least three genuinely comparable recent property sales
- a real estate agent appraisal supported by comparable sales
- and, for commercial property, relevant net income yields.
The important part is that the evidence actually supports the value being reported.
What if the property is leased to a related business?
Some SMSFs hold business real property that is leased to a business operated by a member or another related party. That can be permitted, but it does not mean the lease terms can be whatever the parties prefer.
The arrangement needs to be on arm’s-length commercial terms.
A useful way to look at it is to ask:
- Would you agree to these same terms if the tenant had no connection to the SMSF? If the answer is no, there may be a problem.
- What evidence will the auditor want? For a related-party lease, an auditor should generally be able to see:
- a properly documented lease
- a rental appraisal from when the lease was established
- evidence that both parties are actually following the lease terms
- and a fresh market rental appraisal when an old lease term expires and is renewed.
That last point is easy to miss. A rent figure that was commercial several years ago may no longer reflect the market today.
Do not wait until audit time
Your 2026 SMSF audit may still be months away, but that does not mean the preparation has to wait.
Gathering valuations, comparable sales, rent appraisals and lease records now can make the process much smoother and reduce the frantic email chain when the auditor starts asking questions.
Final thought
A smooth SMSF property audit is mostly about having the evidence ready to support what the fund has already done.
If your SMSF owns property, particularly where it is leased to a related business, speak with your Aspen advisor about what documentation you should have on file before audit time arrives.
