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Routine inspections explained

As part of the property management service we provide to landlords and tenants, our property management team likes to ensure that rental properties in our care are inspected on a regular basis, in accordance with the Residential Tenancies Act 1997.

These routine inspections are beneficial to tenants and landlords alike, as they are designed to determine any concerns with the ongoing tenancy and rectify where necessary.

It’s important to note that a routine inspection is not a housework inspection. Rather the inspection is carried out by property managers on behalf of the owner to ensure that the property is well cared for and to see if there are any maintenance or health/safety issues that may need to be rectified for the tenant.

How frequent are routine inspections?

The first routine inspection is usually carried out no earlier than three months after the tenancy commences. Thereafter, additional inspections can occur every six months.

If a property needs to be inspected prior to these set inspection intervals, the only way a property manager can do so is if the tenant is agreeable.

What can I expect as a tenant?

When you’re due for a routine inspection, your property manager will send notification of when the inspection will take place. You are not required to be present for this inspection if the office holds spare keys. In the event the office does not hold a spare key you will be asked to provide access.

During the inspection process, the property manager will take photos of each room and of any maintenance issues. While the property manager is not seeking to photograph anything personal, if there is anything you would prefer not included in these photos please ensure that these items are out of sight or you advise your property manager accordingly.

After the inspection, if your property manager notices anything of concern they will let you know and provide steps for you to rectify the issue(s) as appropriate.

What should I do to prepare?

As a tenant, you are leasing out someone’s investment property. Sure, you call that place home, but the property is owned by someone else; and your landlord wants to make sure you’re taking care of their asset. A happy landlord makes a happy tenant – and vice versa – so here are some things you can do to impress:

  • Ensure the property is clean and tidy
  • Dust, sweep/vacuum all surfaces
  • Wipe down and clean kitchen and bathroom surfaces
  • Remove any mould from surfaces/grout
  • If applicable, ensure lawns are mowed and gardens are tidy
  • Tidy up any outdoor areas

A good thing to keep in mind is that if you clean your home regularly, you have less to do when a routine inspection comes around. Treat the property as if it was your own, and you’re on your way to passing your inspection with flying colours!

What happens if I have maintenance issues to report?

Your property manager will include a maintenance request form in their email notifying you of an inspection time.

If you have anything to report, you can complete this form and leave in the property, ready for collection during the inspection.

However you shouldn’t wait until your inspection to report maintenance. It’s best to report any issues in writing to your property manager as soon as they occur/are noticed. This can be done via email to your property manager or this form on our website.

What can I expect as a landlord?

Your property manager will send you an email notifying you of the timing of the planned routine inspection. As a courtesy, you will be invited to attend the inspection of your property; however you are not required to attend if you are unable to.

As a landlord, if you would like to attend the inspection of your property but are unavailable during the scheduled time, your property manager may be able to reschedule to a more suitable time (within office hours).

Whether or not you are in attendance, your property manager should always follow up to provide you with a copy of the inspection report along with photos. They will also notify you of any maintenance items raised by the tenant for your consideration/rectification.

Any further questions?

Routine inspections are regular part of the job for property managers, but hopefully now you have a better understanding of what’s involved for you as a tenant or a landlord. However if you’re still unsure, or have any other questions regarding your rental property, please do not hesitate to contact our property management team.

Valuation of assets in SMSFs

With recent changes in the superannuation environment coming into play from this financial year, accurate valuations for all SMSF investments are becoming more and more important. Getting these valuations wrong may adversely impact your fund’s compliance and subsequently your ability to make non-concessional contributions and/or commence a pension.

So what do you need to know about accurately determining the market value of your investments? Let’s find out!

What is market value?

According to the SIS Act (subsection 10(1)) ‘market value’, in relation to an asset means “the amount that a willing buyer of the asset could reasonably be expected to pay to acquire the asset from a willing seller”. The definition also assumes:
(a) that the buyer and the seller dealt with each other at arm’s length in relation to the sale;
(b) that the sale occurred after proper marketing of the asset;
(c) that the buyer and the seller acted knowledgeably and prudentially in relation to the sale.

Why is market value important to all SMSFs?

In a word – compliance. Ensuring all investments in the SMSF are valued accurately is important to remain compliant with superannuation law. These valuations are used to determine:

  • Member balances
  • The minimum and maximum amount of pensions payable to pension members
  • Non-concessional contribution caps
  • Eligibility for government co-contributions
  • Eligibility for a tax offset where contributions are made for a spouse
  • Whether the new catch-up concessional contribution cap can be used
  • Whether the segregated method for claiming exempt pension income can be used

Who checks this information (for compliance purposes)?

The fund’s independent auditor checks to ensure that the market values reported in the annual financial statements are based on objective and supportable evidence. If the auditor isn’t satisfied with the provided information, more support evidence may be requested or they may report a qualified opinion to the ATO, which may result in a follow up from them. If the ATO is not satisfied with the market values reported in the financial statements, a fine of 10 penalty units (currently $2100) per trustee may be imposed.

How do I go about determining the market value?

The value of some super fund investments, such as listed company shares and bank accounts, are easy to obtain. However for investments such as real estate, unlisted investments, collectables and personal use assets, the market value may not be readily available or obvious and may require a qualified person to make a professional valuation. These valuations can be obtained as follows:

Real estate

Trustees are not required to have real estate formally valued each year. Rather, the general rule of thumb used by most SMSF auditors is that real estate held by the SMSF must be valued at least once every three years. There are situations where a valuation is required on a more frequent basis are:

  • When a pension has commenced, a valuation no older than 12 months prior to the commencement of the pension is needed
  • When the auditor believes that the valuation is unacceptable and is either too high or too low
  • Where the SMSF has in-house assets and the 5% in-house asset ratio needs to be considered

Additionally, a valuation for the preparation of the SMSF’s financial reports may be required if an event has occurred that may have affected the value of the property since its last valuation, such as a renovations, changes in market conditions or a natural disaster.

The valuation can be undertaken by anyone (including the trustees of the fund) as long as it is based on objective and supportable data. However from an auditor’s perspective, a valuation determined by a party independent to the SMSF (such as independent valuers and real estate agents) would hold more weight compared to a valuation made by the SMSF’s trustee.

Units in unlisted trusts and shares in unlisted companies

When valuing an unlisted security, it can sometimes be tricky to gather reliable support evidence for audit. The unlisted trust or company may not need to have its assets valued at market value or have its financial statements independently audited each year. Therefore just relying on the reported values on the financial statements may not be adequate from an audit perspective.

Instead, consideration of other available information such as recent sales or purchases of the company’s shares or units and/or independent valuation of the underlying assets of the trust or company may provide a more dependable market value to the SMSF’s financial reports.

Collectables and personal use assets

There is no requirement for formal market value assessment for transfer/disposal of collectables and personal use assets to a related party, if they were acquired by the SMSF before 1 July 2011.

However if the asset was acquired post 1 July 2011, the transaction must be made at market value determined by a qualified independent valuer.

Where can I learn more?

The ATO provides comprehensive guidelines regarding the valuation of assets held in SMSFs.

Alternatively, should you wish to discuss what these guidelines mean for you, please do not hesitate to contact The Hopkins Group accounting team today.

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The Hopkins Group

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