Why valuations matter

Market-value reporting determines each member's balance, which feeds into contribution caps, pension minimums and eligibility thresholds, and underpins the financial statements the auditor reviews each year.

Valuations also matter when money moves in or out of the fund. Starting a pension, paying a benefit, making an in-specie contribution or transferring an asset all rely on an accurate Market Value at the time.

Market value is the standard

Market value generally means the amount a willing buyer and a willing seller would agree on, dealing at arm's length. The trustees are responsible for determining it, even where others are engaged to help gather the information.

The valuation date usually falls at the end of the financial year, but some events call for a value at another date, such as when a pension begins.

Evidence must be objective and supportable

A valuation should rest on objective and supportable evidence, not on the trustees' opinion alone. For an auditor, the question is whether an independent person could look at the evidence and reach a similar value.

Keeping the evidence on file at the time, rather than reconstructing it later, is what makes a valuation defensible if it is ever questioned.

Evidence for common assets

Listed shares and managed funds are straightforward: the Market Price or unit price at the valuation date is usually sufficient evidence.

Real property is harder. Objective data such as recent comparable sales, independent appraisals or a formal valuation can support a value, with a professional valuation becoming more relevant where the property is a large part of the fund, where its value may have changed materially, or where a member is moving into pension phase.

Cash is valued at its balance, while unusual or unlisted assets, such as shares in a private company or units in an unlisted trust, generally require more detailed evidence because no public price exists.

Harder-to-value Assets and collectables

Assets without a public market, including private company shares, unlisted trusts and collectables such as artwork, need particular attention. Objective material such as financial statements, net asset backing or specialist appraisals can support their values.

Collectables and personal-use assets also carry their own storage, insurance and valuation rules, and a valuation by a qualified independent party is often expected when they are disposed of to a related party.

A hypothetical example

Consider a hypothetical example. A fund holds a commercial property and some ASX-listed shares. The shares are valued at their 30 June market price with a simple statement, while the property is supported by recent comparable sales, and a full valuation is obtained in the year a member starts a pension.