By Kelly Camborne
Self-managed pension fund trustees who choose not to have an independent assessment of the market value of the fund’s assets run the risk of including reservations in audit reports, and potentially reporting wrongdoing to the Australian Tax Office (ATO), said Shelley Banton, director of Super Clarity.
Shelley Pantone, during a webinar organized by the Institute of Financial Professionals in Australia on market valuations, said fund trustees had a clear choice: either pay for an independent valuation, or gather sufficient objective evidence on which to base and justify the valuation they make themselves.
And Pantone said, “What options are there for trustees who want to make sure they don't make a mistake? Let's start with the initial question: Do trustees want to pay for an independent market value assessment report or not? If the answer is yes, there will be no problem or complications, and the asset will be ready for scrutiny.”
And remember that the key word here is independent, because the evaluator cannot be a member of the fund or a related party, such as a relative. Just as an auditor may not review his own fund, a resident who also serves as the treasurer may not make such an assessment. This is a conflict of interest."
But if the cashier does not want to pay for the independent evaluation, there are other questions to be asked.
And Pantone said: “Among these questions: Is the cashier willing to put the time and effort into obtaining objective data that can be relied upon, and preparing an integrated market assessment file to the satisfaction of the auditor and make him give approval? This will lead us to a secondary question: who will allocate the actual time to accomplish this task? Is he the cashier, the accountant, or the consultant? This is likely to determine the level of quality of the information that will be prepared.”
"If the assessment does not meet the required criteria, a problem may arise relating to regulation 8.02B, and it may have to be reported to the Australian Taxation Office. Auditors must report the violation to the office through the Accountant’s Violations Report (ACR), when the violation amounts to 5% of the fund’s assets, or exceeds $30,000. There is no discretion with respect to these reporting requirements.”
It also meant that if the statement of financial position contained material errors, a reservation from Part A would be included in the audit report.
And Pantone added: “One of the reasons these rules are so clear and settled is that auditors won’t risk accepting questionable assessments based on historical data. And we know this because fiscal year 2025 saw an increase in reported irregularities under regulation 8.02, which now accounts for more than 12% of total auditors’ irregularities reports (ACRs), up from less than 10%.”
And there are reasons related to the Pension Fund Standards Act (SIS) and taxes that make the conduct of market assessment necessary, explaining that the first reason is the preparation of financial statements at the end of the year in accordance with regulatory article 8.02B.
"Second, when the fund acquires an asset from a related party, the transaction must meet the requirements of Article 66. This means that if the transaction is not made at market value, there will be a violation of Article 66, and the asset may also be classified, according to its type, within the fund's internal assets," she said.
And third, it is also required to ensure that all transactions are conducted and maintained in accordance with the principle of dealing between independent parties and on purely commercial grounds. Here we are talking again not only about the relevant parties, but also about the other parties; “The discussion of trade terms involves both associated and unrelated parties.”
Pantone said that disposing of holdings and assets intended for personal use and selling them to related parties, in accordance with regulation 13.18AA, also requires an assessment of market value.
And she added: “What about testing the fund’s internal asset ratio? We need to make sure that the total value of the assets, not their net market value, is used in this equation; This could distort the outcome and quickly turn an asset that does not actually exceed the prescribed 5% limit for internal assets into a breach of compliance requirements.”
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