As we pass the halfway point of the financial year, we’d like to share some important updates to SMSF audit processes now in place.
These changes are based on feedback from the Australian Taxation Office (ATO) and are about ensuring audits continue to meet current regulatory expectations.
While some of these updates may mean providing a little more information than in the past, they are designed to reduce risk and support ongoing compliance.
Over recent months, we’ve had many conversations with clients about the valuation of properties held within Self Managed Superannuation Funds (SMSFs).
Property market values must be reviewed and updated every year. Historically we have used rates notices as sufficient evidence, however, the ATO has now made it clear that market based evidence is required to support property values.
One method sometimes used is the net capitalisation method, which estimates value based on rental income. While this method can still form part of the valuation process, the ATO has advised that it is not sufficient on its own.
Instead, it needs to be supported by other evidence such as
- comparable property sales
- market growth data, or
- rental yield information
Since 5 January 2026, where a property valuation is based only on rental income or net yield, you will be required to provide additional supporting evidence before the audit can be completed.
In practical terms, this means:
- Each year a real estate appraisal with comparable sales is required
- Every third year, a formal independent valuation is required
This increased focus on property values is not unexpected. Following the introduction of the Division 296 legislation, the ATO is paying closer attention to the overall value of each individual’s superannuation balance.
It’s important to note that the ATO looks at superannuation balances per individual, not per fund. Where a fund has multiple members, Division 296 only applies if an individual member’s balance exceeds the relevant threshold. The total value of the fund itself is not the deciding factor.
Additional updates for pension payment review
There is also an update on how pension payments are reviewed to ensure alignment with the ATO’s current guidance.
If a pension does not meet the required minimum payment for the year and no valid exception applies, the ATO treats the pension as having ceased. Payments made during that year are then treated as lump sums and the fund loses its tax exemption for that pension account. The exemption cannot be claimed again until the pension is formally stopped and restarted.
For Transition to Retirement pensions, failing to meet the minimum payment can have more serious consequences. If the member has not met a condition of release, payments may be considered illegal early access to superannuation (super).
Starting at 5 January 2026 pension payments will be reviewed more closely. Where minimum requirements are not met, we will raise this with the fund. If the issue is not resolved through updated financial information, it may be noted in the audit management letter and could result in qualifications to the audit report.
Many super funds hold their investments through platforms or wrap accounts, often referred to as investment portfolios.
While these platforms provide annual statements, auditors are required to carry out additional checks to make sure the information is complete and accurate. In some situations, the statements alone may not provide everything needed to finalise the audit.
From time to time you may still be asked for extra information to ensure the audit is completed correctly and in line with current requirements. We’ll always let you know early if anything further is needed and work with you to keep the process moving smoothly.
These updates reflect the ATO’s increasing focus on accurate valuations, correct pension payments and strong audit evidence. While this may mean providing more documentation than in previous years, the aim is to ensure funds remain compliant and avoid issues down the track.
If you have questions about how these changes may affect your fund, the Verliyah team is here to help. Early conversations and proactive planning can make the audit process clearer and far less stressful.
Need a hand understanding the next steps for you? You can catch us at our Epsom or Castlemaine office, give us a call or chat over a video meeting.
Contact us here: https://verliyah.com.au/contact/