valuation of SMSF balance containing residential property

When you switch to the pension phase in a Self-Managed Super Fund (SMSF) that includes a residential property, determining the fund balance for the purpose of calculating the minimum drawdown is crucial. The minimum drawdown requirement is set at 4% of the retirement balance, increasing with age, and it’s important to use an accurate valuation of the property to comply with these rules.

Here are the common methods used for valuing a property in an SMSF for this purpose:

(a) Purchase Price: This is generally not used for ongoing valuation as it does not reflect the current market value of the property.

(b) 15x Net Rent: This method, often used for commercial properties, might not accurately reflect the market value of a residential property, as residential and commercial properties have different valuation metrics.

© Bank Assessment with a Desktop Valuation: This is a common and reliable method. Banks often use licensed valuers who provide a market value based on current conditions, which is crucial for compliance.

(d) Real Estate Websites (onthehouse.com.au, realestate.com.au, domain.com.au): While these sites can provide a good indication of potential market value, they should be used cautiously. The figures provided are often estimates and can vary depending on the data available.

(e) Land Value (from a rates notice): This only reflects the value of the land and does not include the value of any buildings or improvements on the property. Hence, it’s not suitable for SMSF valuation purposes where the total property value is needed.

(f) Purchase Price Inflated by CPI: This method does not accurately reflect market changes in property prices, as the CPI is a general measure of price inflation across a broad range of consumer prices, not specific to real estate markets.

(g) Independent Valuation by a Licensed Valuer: This is often

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