The annual audit has always been a key requirement for running a self-managed super fund, but in 2026 it carries additional importance. Two developments are occurring at the same time: the ATO has increased its SMSF auditor compliance focus for 2026–27, particularly around market valuations and auditor independence, and Division 296 has commenced from 1 July 2026.

Together, these changes increase the importance of accurate asset values, reliable documentation and a well-supported audit process. For trustees, understanding why valuations and audit evidence matter has become an increasingly important part of managing an SMSF.

The audit’s role has not changed, but the stakes have

Every SMSF must undergo an annual audit by an ASIC-registered SMSF auditor before lodging its annual return. The auditor must be independent and reviews whether the fund’s financial statements are accurate and whether the SMSF has complied with relevant Superannuation rules.

Where certain reportable breaches are identified, the auditor may need to lodge an Auditor Contravention Report with the ATO.

The audit framework itself has not changed. However, the broader regulatory environment has evolved. As asset values become more relevant to tax and compliance considerations, the quality of evidence supporting those values becomes increasingly important.

The ATO’s 2026–27 auditor focus

The ATO reviews SMSF auditor compliance priorities regularly, and for 2026–27 market valuations and auditor independence are key areas of attention.

Asset valuations are an important focus because SMSF Assets must generally be recorded at Market Value each year, supported by objective and verifiable information.

A recurring issue identified by regulators is insufficient evidence demonstrating asset ownership, existence or valuation. Trustees may have difficulty during audits if they cannot provide documentation supporting the values recorded in the fund’s financial statements.

Auditor independence is another area of focus. SMSF auditors must comply with independence requirements, including restrictions on certain services provided to the same fund.

The ATO has also highlighted attention on high-risk and high-volume auditors and newly registered auditors. While these matters primarily concern auditors, they influence trustees because a detailed audit process requires complete and accurate records.

Why Division 296 raises the stakes on valuations

Division 296 commenced on 1 July 2026 and introduces an additional tax on Earnings attributable to portions of an individual’s total superannuation balance above relevant thresholds.

An additional 15% tax applies to the portion between $3 million and $10 million, resulting in an effective tax rate of up to 30% on that portion. A further additional 10% applies to the portion above $10 million, resulting in an effective tax rate of up to 40% on that portion.

The thresholds are subject to indexation over time.

The final legislation differs from the original proposal because unrealised capital gains are not included. The measure applies to realised earnings, and the Liability is assessed personally to the individual.

For the 2026–27 financial year, calculations are based on relevant total superannuation balance information at 30 June 2027.

Because total superannuation balances depend on the value of fund assets, accurate valuations become particularly important for members who may be affected by Division 296.

What this means for trustees

For SMSF trustees, the practical message is that asset valuations require proper support rather than informal estimates.

Listed investments generally have readily available market prices. However, assets such as real property, private company shares and unlisted investments may require additional evidence.

Supporting information may include comparable sales data, independent valuation reports, financial statements of underlying entities or other relevant documentation depending on the asset type.

Trustees should also understand that auditor independence is a fundamental requirement. Audit arrangements should allow the auditor to provide an independent assessment of the fund’s compliance and financial information.

Common mistakes to avoid

One common mistake is relying on outdated or unsupported valuations, particularly for property and unlisted assets, and only addressing valuation evidence when the auditor requests it.

Another issue is incomplete records showing ownership of fund assets. Without appropriate documentation, auditors may not be able to confirm that assets belong to the SMSF.

Trustees may also underestimate how asset values affect broader superannuation outcomes. For members with larger balances, inaccurate valuations may influence calculations connected with Division 296.

Maintaining valuation evidence throughout the year, rather than preparing it only during audit season, can help reduce delays and questions.

What to watch next

The practical impact of Division 296 will develop over coming years, with calculations relying on relevant balances and assessments issued after the affected income years.

Trustees should continue monitoring ATO guidance, future SMSF auditor compliance priorities and any developments relating to valuation expectations.

Maintaining accurate records and reviewing asset evidence regularly can help trustees respond to changing compliance requirements.

Key Insights

SMSF audits have become more significant in 2026 because the surrounding environment has changed, even though the audit process itself remains the same.

The ATO’s focus on valuations and auditor independence, combined with Division 296’s connection to total superannuation balances, increases the importance of reliable records and well-supported asset values.

Trustees who maintain clear documentation, support valuations with appropriate evidence and understand their compliance responsibilities can better manage the evolving SMSF environment.