In April 2025, the ATO released updated SMSF Valuation Guidance. This states that the trustee must determine the market value of the assets held by the fund at 30 June each year, for financial statement purposes.
The ATO defines market value as: “an amount that would be agreed to by a willing buyer and seller within an arm’s length transaction, with the value evidenced, using objective and supportable data”.
The SMSF auditor’s role is to consider the evidence provided by the trustee and whether this is sufficient and appropriate to support the recorded market value. Within this role we are often asked by trustees if an unlisted investment can be recorded at nil market value?
As auditors, we must consider the type of objective and supportable data that is available to provide reasonable assurance that the investment market value is nil at 30 June.
We also consider available evidence up to the date of the issue of the audit report.
A trustee is required to:
► Support the market value at 30 June each year
► Consider the available evidence
► Determine what information is the most relevant to support a market value
► Provide adequate documentation to the auditor
Some circumstances a nil market value may be obvious.
► The entity is in administration, and the initial administrator report indicates that there will be no return to shareholders;
► The entity has been deregistered, and the circumstances including no return to the fund have been communicated in writing.
Typically circumstances and evidence of a nil market value are more opaque.
These circumstances usually arise for unlisted securities with no ready market, where evidence gathering by the trustee has not provided relevant information to support a market value. You can read our article on this here.
The trustee should consider the nature of the investment, and the underlying operations and assets of the unlisted investment.
Information to consider that may support reasonable assurance of a nil market value includes:
►An administrator has been appointed but an administrator report is yet to be received;
►Shareholder updates that were received prior to the administrator appointment indicated available assets to creditors.
►Evidence of deregistered entity and documentation of trustee enquiries and past communications.
► Business start up entity:
Ο Evidence of cash, financing or capital raising not available to continue the development of the intellectual property of the entity to commercialisation, and no net tangible assets;
Ο Shareholder report of development of intellectual property on hold and no net tangible assets;
Ο Shareholder report initial business idea not commercially viable and no net tangible assets
► Business in commercialisation phase:
Ο Evidence of no return on investment;
Ο Accumulated losses;
Ο Negative shareholder equity;
Ο No valuable intellectual property should the business not be a going concern.
► Inability to make contact
Ο Representation and evidence to support attempted contact with the entity and its officeholders to obtain relevant information over an extended period of time;
Ο Evidence of available on-line entity activity and reports such as creditor watch.
So, there are multiple sources that may provide relevant market value information for an unlisted investment. For this reason, when investing in an unlisted investment, it is recommended that a trustee considers all sources:
► gather a variety of evidence especially where there is no secondary market
► engage with the investment provider proactively for documentation
► maintain a file of supporting data each year for audit including enquiries made.
If you require assistance gathering or assessing the relevant data to support your unlisted investment valuations, please don’t hesitate to reach out. We’re here to help ensure your documentation is compliant and audit ready.
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