Do I need a business valuation for the ATO?
The short answer
Wherever a tax position depends on a market value, that value has to be able to be substantiated. For anything material, that means a valuation by a qualified valuer stating the standard of value, date, methodology, assumptions and evidence, with a signed declaration. Self-assessed values are permitted but carry adjustment risk.
When market value comes up
CGT events and the small business concessions, the net asset value threshold test, Division 7A dealings between a company and its shareholders, employee share scheme grants, restructures and rollovers, trust and superannuation asset positions, and transfers between related parties. Each depends on a market value that has to hold up.
What makes a valuation acceptable
The ATO’s published guidance is consistent about process rather than prescriptive about method: state the standard of value, the valuation date, the methodology and why it was chosen, the assumptions, the evidence relied on, and who prepared it with what qualifications. A defensible process is what gets accepted.
Self-assessment is allowed and risky
You may use your own reasonable estimate of market value. If it is later found to be unsupportable, the position is adjusted, with the general interest charge running from the original due date and penalties potentially applying. The valuation fee is almost always trivial against that exposure.
Timing matters more than people expect
A valuation prepared at the time of the event, on information available then, is materially stronger than one reconstructed years later after the ATO has asked. Contemporaneous documentation is the cheapest insurance available in this area, and it cannot be created retrospectively.
The numbers
When a valuation is expected
Common Australian tax situations where a market value has to be established and substantiated.
Scroll the table sideways →
| Situation | Valuation date | What is valued |
|---|---|---|
| CGT event on business disposal | Date of the CGT event | The business or the interest disposed of |
| $6m net asset value test | Just before the CGT event | Net assets of the entity and connected entities |
| Division 7A asset transfer or forgiveness | Date of the dealing | The asset or interest transferred, at arm’s length |
| Employee share scheme grant | The grant date | Market value per share, fully diluted |
| Restructure or rollover | Date of the restructure | The assets or interests moving |
| Related-party transfer | Date of transfer | The asset, as between unrelated parties |
General information only, not tax advice. Your accountant or registered tax agent advises on which provisions apply and what must be valued; we provide the independent market value the position relies on.
Caveats
Why market values get adjusted
In our experience, almost never because the figure was outlandish.
Who answered this
Prepared by the valuation team at Business Valuations Brisbane, the business valuation division of Asset Valuations Group. Every report we issue is signed by a Certified Practising Valuer of the Australian Valuers Institute. General information only — not advice on your specific circumstances.
- No stated methodology A number in a spreadsheet or an email has nothing for a reviewer to accept. Method, evidence and declaration are what make it a valuation.
- The wrong date Valuing at 30 June when the event was in March is both wrong and easy to spot.
- Book values used as market values Written-down plant and historical-cost property will both differ from market, sometimes decisively — particularly in threshold tests.
- Hindsight in the reasoning Using information that emerged after the valuation date undermines the entire report, however favourable the number looks.
Reviewed by a Certified Practising Valuer
Reviewed by Jarrad Khoury, Director and Head of Valuations — Registered Valuer (QLD, Not Limited), Licensed Valuer (WA, Not Limited), CPV and CBV. Published by Business Valuations Brisbane, the business valuation division of Asset Valuations Group.
Last reviewed
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