What you need to do to keep your SMSF property compliant?

Many business owners on the Sunshine Coast invest in commercial property within their self managed super fund (SMSF). This can be a great strategy to optimise your tax position and fund your retirement. While this may sound straightforward at first, it’s important to understand what you’ll need to do to keep your SMSF property compliant with ATO regulations.

Or perhaps you’re wondering how commercial property in your SMSF would suit your business tax strategy? Many business owners start by getting the right tax advice and building a compliant foundation from day one.

Here’s an overview of the documentation you’ll need to maintain for any commercial property that’s held by your SMSF.

1. Property Valuation Requirements

The ATO requires all SMSF-held properties to be valued at market value each financial year. As the Trustee(s) you’re responsible for ensuring these valuations are up to date and accurately recorded in the fund’s accounts.

Why this matters

• Ensures accurate financial reporting and member balances

• Required for compliance with ATO legislation

• Impacts pension payment calculations and contribution caps

• SMSF auditors need current valuations for compliance checks

What you need to do

• Obtain a current market valuation for each SMSF property

• A formal, independent valuation must be obtained at least every second year, or sooner if:

  • The property value has significantly changed

  • Major renovations or market shifts have occurred

• In non-formal valuation years, a real estate agent's market opinion or recent comparable sales data may be acceptable

It’s worth noting that there’s no regulatory requirement for the valuation to be conducted by a licensed valuer or real estate agent. Trustees can provide a trustee’s declaration that includes at least three recent comparable sales (dated between 1 April and 30 September). This must be supported by documentation such as screenshots from real estate websites and a clear explanation of the property valuation methodology used.

Getting an independent valuation is recommended because it’s quick for you and less likely to raise questions with the auditor. In addition, the cost of an independent property valuation is a deductible expense when it's used for annual compliance.

Who can provide you with a valuation

• A qualified independent registered valuer (recommended for significant changes)

• A real estate agent’s written appraisal on their letterhead with a clear market estimate

Please note:

• Auditors must review evidence to support the property valuation as part of their audit. Failure to provide a current property valuation may qualify part A of the audit report and potentially also part B, depending on the materiality

• Should the lack of evidence of property valuation be repeated in the second year, this would result in part A and B of the audit report being qualified, and a contravention report lodged with the ATO under SISR 8.02B

Partnering with a proactive SMSF accountant will save you time, stress and potential ATO penalties.

2. A Rental Appraisal when the Property Is Rented

If the commercial property is rented, especially to a related party, the ATO and SMSF auditors may require confirmation that the rental income is consistent with market rates.

What trustees might consider

• Getting a rental appraisal from a local agent

• Keeping an up-to-date lease agreement that supports the current rental terms

When a rental appraisal may be appropriate

• If there has been a change in tenants or rental terms

• If local rental values have changed

As a general practice, most trustees obtain a new rental appraisal every 2 to 3 years to support their audit documentation.

3. The Importance of a Lease Agreement

Every SMSF rental property should have a lease agreement in place. Regular review is particularly important for related party tenancies to ensure all documentation stays compliant and up to date.

Why a lease agreement is generally expected

• It documents the terms under which the property is used

• Helps auditors or the ATO determine if the rental terms reflect market conditions

How trustees might manage this

Lease agreements can be prepared by:

• A licensed real estate agent or property manager

• A legal professional

• Trustees who self-manage may use templates, provided they comply with tenancy laws and SMSF rules

Lease agreements that don’t include CPI increases may breach SISA sections 1.09 and 62, especially in related party arrangements or where no written lease exists.

4. How to prepare for your SMSF Accountant’s Information Request

When your SMSF accountant formally requests documentation relating to your fund’s commercial property holdings, we recommend gathering the following documents ahead of time:

• Your most recent property valuation(s)

• Trustee’s declaration that includes at least three comparable sales (dated 1 April to 30 September), only if no formal valuation exists for that period

• A current lease agreement for each SMSF property

• Rental statements (if applicable)

• Any documents supporting market rent assessments or rental appraisals

This list is not exhaustive, and your accountant may request additional documentation to ensure you are compliant with ATO requirements.

How ABA Advice Beyond Accounting keeps your SMSF property compliant

At ABA, our SMSF accountants in Birtinya will partner with you to ensure your fund stays compliant and aligned with your long-term financial goals. Whether you’re just starting to explore SMSFs or already have one set up, we’ll make the process simple, transparent and tailored to your unique needs.

Not sure if your current SMSF setup is ticking all the right boxes? Contact us today to talk about how we can make your super work harder for you.

Important note

ABA. Advice Beyond Accounting are not financial advisors and cannot offer investment advice. ABA always recommends seeking investment advice from a licensed Financial Advisor and would be happy to recommend a Sunshine Coast Financial Advisor if you do not have one.