Key Highlights

  • ASIC's Report 841 found problems with $80 billion of super funds' unlisted investments.
  • Funds could not back up valuations on 26 of 33 investments reviewed.
  • Audit reviews raised concerns in half of the cases reviewed.
  • Valuation evidence matters for member balances and the new $3 million super tax.

When the corporate regulator asked super funds to show how they had valued a sample of their unlisted investments, most could not. ASIC's Report 841 found funds produced a valuation model or independent report for just seven of 33 investments requested. With the new $3 million super tax now running off member balances, and unit prices deciding what members pay and receive, how funds value hard-to-price Assets matters more than ever.

What ASIC reviewed

Report 841, Accounting for your super: super fund financial reporting and audit 2025–26, was published in October. It covers ASIC's review of 42 financial reports of registrable Superannuation entities (RSEs).

ASIC also ran six audit surveillances across BDO, Deloitte, EY, KPMG and PwC. Together these covered $275 billion of investments.

The report does not name the funds involved.

The $80 billion problem

ASIC's findings related to $80 billion of unlisted investments, or 29% of the $275 billion reviewed.

Of that $80 billion, $67 billion was externally managed, including $6 billion in private credit. The remaining $13 billion was managed internally.

The headline finding is about evidence. ASIC asked for support for 33 investments, and funds supplied a valuation model or independent valuation report for only seven. That left 26 where the fund could not produce that documentation.

ASIC's figures also show where problems cluster. Of $157 billion in Level 3 assets, the hardest to value because they rely on unobservable inputs, findings related to 49%, or $76 billion. Of $26 billion in Level 2 assets, findings covered 14%, or $4 billion. There were no findings on $92 billion of Level 1 assets, which have quoted market prices.

One of the more striking findings involves four RSEs that did not promptly adjust member liabilities after large write-downs of investments.

ASIC said this overstated member liabilities. In some cases it resulted in significant negative net assets. In other words, the value credited to members briefly exceeded the value of the assets backing it.

ASIC did not identify those four funds. There is nothing in the report linking them to any particular collapse or investigation.

Auditors under scrutiny

Three of the six audit surveillances raised concerns. Two involved EY and one involved PwC. ASIC reported no findings for Deloitte or KPMG, and one documentation-only finding for BDO. It issued four comment forms.

A follow-up report released on 29 October, Report 842, broadened the lens. ASIC reviewed 353 financial reports, including those of 42 RSEs, and its audit surveillance covered 25 files across 12 firms.

Commissioner Kate O'Rourke said: "Auditors need to be independent, obtain stronger evidence, challenge management assumptions".

ASIC is expected to extend this work to managed Investment schemes in 2026–27, according to an industry summary.

ASIC's message is that trustees need documented, defensible valuation processes, particularly for Level 3 assets, and that auditors must test them rather than accept management's numbers. That makes the quality of valuation records more than an audit issue, because it can show up in members' accounts.

The report's findings are observations from a surveillance program, not court findings or enforcement action. ASIC has not alleged any breach of the law by a named fund in Report 841.

For SMSF trustees, the same principle already applies. The ATO expects market valuations of fund assets each year, and SMSF auditors check the evidence behind them.

Why it matters for members and the $3m tax

Unlisted assets such as infrastructure, property, Private Equity and private Credit do not trade daily. Their values are estimates, updated periodically by managers and valuers.

Those estimates feed directly into the unit prices and crediting rates that determine members' balances. If an asset is overvalued, members leaving or switching may be paid too much, while members who stay bear the later write-down. If it is undervalued, the reverse can happen.

A member does not need to hold an unlisted asset directly to be affected. In a pooled balanced or growth option, every member's unit price reflects the fund's estimate of what those assets are worth.

Valuations also flow into the Division 296 tax, which has applied since 1 July 2026. It imposes an extra 15% on Earnings attributable to the part of a member's total super balance above $3 million, and a further 10% above $10 million.

The ATO describes Division 296 earnings as an adjusted amount based on the fund's taxable income. But the balance test, and the share of earnings caught by the tax, depend on each member's reported total super balance. For 2026–27, that balance is tested at 30 June 2027.

Hypothetical example: how a valuation changes the tax

Hypothetical example: Raj's total super balance at 30 June 2027 is reported as $3.2 million, partly because his fund holds a large unlisted infrastructure investment.

Broadly, the share of earnings above the $3 million threshold is ($3.2 million minus $3 million) divided by $3.2 million, or 6.25%. If $200,000 of earnings is attributed to Raj for the tax, the extra 15% applies to $12,500, giving Division 296 tax of $1,875.

Now assume a more conservative valuation would have put his balance at $3.1 million. The share above the threshold falls to about 3.23%. Applied to the same $200,000, the tax would be about $968.

The difference is roughly $907, purely from how one balance was valued. Raj would have no easy way of seeing that difference on his statement. The figures are illustrative and simplified, and actual calculations depend on the ATO's method and the fund's reporting.

What to watch / key dates

  • ASIC's planned extension of financial reporting surveillance to managed investment schemes during 2026–27.
  • Whether ASIC follows up with individual funds or auditors on the findings in Report 841 and Report 842.
  • APRA's separate work on Trustee investment governance, which its chair told a Senate committee in October would be a continuing focus.
  • The ATO's law companion ruling on Division 296, which the ATO said earlier this year was being drafted.
  • 30 June 2027: the date total super balances are tested for the first Division 296 year.