“We’re in a very interesting space trying to navigate through that with clients,” she said.

Banton said under regulation 8.0 2(b), it states that all assets have to be valued at market value when a fund prepares its accounts for each year.

“Some assets are easier to value than others and it becomes very difficult when we can't get that information and especially, for example, with unlisted entities,” she said.

“But reg 8.0 2(b) is all about market value and it's not up to the trustees to be able to select a value that suits their purposes best. It has to be at market value. They can't adopt a Goldilocks pricing where they go ‘Well, I'm going to value some assets high, so that that an in-house asset is artificially low, or I'm going to take another price, because I want my pensions to be at this level’.”

To determine what constitutes market value Banton said it is important to look at section 10.1 of the SIS Act which states that 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, if a number of assumptions were made.

“When it talks about an asset, it is talking about any form of property which also includes cash,” she added.

The first assumption that needs to be considered is that the buyer and the seller were dealing with each other at arm's length.

“This means that there is not a fire sale and that it is not being sold to a related party from a related party at an underinflated or an overinflated price,” Banton said.

“It also means that there's no sideline sweetheart deals being made outside the superfund and that the sale occurred after proper marketing of the asset. When we look at that, it means that the asset just wasn't given away to the buyer, it was actually put out to the market, and all the information about that asset was known to both the buyer and the seller to be able to strike that price.”

Additionally, Banton said that it also assumed the buyer and the seller both acted knowledgeably and prudentially in relation to the sale, meaning they understood the prices for similar assets and what was happening in the market for that type of asset.

“While these are assumptions only, we really have to remember that these have to be included in the trustee's evidence when they decide not to go down the path of getting a formal independent valuation,” she said.

“This means that the market valuation needs to be based on specific methodology, using careful consideration and sound judgment.”

However, she said one of the things not included in these assumptions is net market value, which takes into account disposal costs and depreciation.