Accountant's letter vs. valuation report: cost, defensibility and when each works.

The short answer

An accountant's letter usually costs a fraction of a formal valuation, often a few hundred dollars of billed time, sometimes nothing at all for a long-standing client, while full valuation reports in Australia typically run $5,000–$15,000+ at traditional firms, or from $1,495 + GST at a fixed-fee specialist. That gap buys a genuinely different product, not just more pages. The letter states a number; the report shows how the number was reached, on what evidence, under which methodology, and why an independent professional is prepared to sign it. The practical dividing line is the audience. If the number only needs to inform you, a letter is often enough and the cheaper choice is the right one. If the number needs to persuade someone whose interests differ from yours, the ATO, a co-owner, a former spouse's lawyer, a buyer, the features the letter omits are exactly the features a reviewer looks for first.

What an accountant's letter actually is

The typical letter runs one to three pages. It states an estimated value for the business, sometimes references a rule-of-thumb multiple or an industry benchmark, and closes with disclaimers: usually that the figure is an estimate only, that no valuation engagement under professional standards has been performed, and that the letter must not be relied upon by third parties. Those disclaimers are not laziness. They are your accountant being precise about what the document is. The cost reflects that scope honestly: expect somewhere between a few hundred and a couple of thousand dollars of billed time, occasionally waived as goodwill. That is fair value for what it is. The problems only start when a letter is asked to do a report's job.

The defensibility gap: four things a letter doesn't carry

Put a letter and a formal report in front of a reviewer, an ATO officer, an opposing expert, a buyer's accountant, and four structural differences decide which document survives.

• ·Methodology disclosure. A report states which accepted methodologies were applied, why they were selected for this entity and purpose, and what each produced. A letter typically states a conclusion without showing working: which gives a reviewer nothing to test, and therefore nothing to accept.
• ·An evidence file. A report sits on documented comparable evidence, normalisation adjustments and sensitivity analysis, retained in a working file, ours is kept for ten years. A letter usually has nothing behind it beyond the financial statements themselves.
• ·Independence. Your accountant acts for you, is paid by you across many engagements, and often prepared the very financials being valued. None of that implies dishonesty: but it is a structural objection the ATO or a counterparty can raise no matter how careful the letter is. An independent valuer signing under an independence statement removes the objection before it is made.
• ·Signing accountability. A letter hedged with "estimate only, not to be relied upon" is, by its own terms, a document nobody is accountable for.

Where a letter genuinely suffices

Fairness to accountants matters here: your accountant often knows the business better than any external professional ever will, and for a real set of purposes a short letter is the proportionate choice. Paying for a formal report in these situations is waste. The common thread is that the audience is you, and nobody adversarial will ever test the figure.

• ·Internal planning: early retirement or succession conversations, sanity-checking a level of insurance cover, tracking value year to year on the way to an eventual sale.
• ·Preliminary scoping: establishing a rough range before deciding whether a transaction is worth pursuing at all, and before commissioning formal work.
• ·Some lender requirements: certain lenders accept an accountant's confirmation for smaller credit decisions. Check what the lender actually requires before paying for more than it asks.
• ·Owner alignment: giving partners or family members a shared starting number for a discussion, where everyone understands it is a starting point and not a settled position.

Where a letter fails: the ATO's dividing line

The ATO's market valuation guidance is process-focused: what makes a valuation supportable for tax purposes is an objective, documented process a reviewer can follow: with the market value standard itself tracing back to Spencer v Commonwealth (1907), the willing but not anxious buyer and seller. A conclusion without a disclosed process cannot meet that description even if the number happens to be right, because there is no way to demonstrate that it is. That puts a specific set of situations beyond what a letter can do.

• ·CGT market value requirements: where s 116-30 ITAA 1997 substitutes market value because the parties were not dealing at arm's length or there were no proceeds, the transaction by definition has no negotiated price to point to. The valuation is the evidence, so it has to be built like evidence.
• ·Small business CGT concession claims: the Div 152 concessions and the maximum net asset value test turn on market values, the dollars at stake are usually large, and these claims are a known area of ATO attention. A letter here risks the concession itself.
• ·Related-party transfers: family succession, trust restructures, Subdiv 328-G rollovers, Division 7A asset transfers. These are precisely the transactions where independence matters most, because the parties on both sides want the same outcome and the accountant acts for all of them.
• ·Disputes: in family law or a shareholder dispute, the other side's expert arrives with a methodology and an evidence file. A letter is dismantled by the first question in cross-examination: how did you arrive at this figure?

The hybrid that usually wins: your accountant plus an independent valuer

The letter-versus-report framing hides a combination worth naming: your accountant prepares the financial groundwork, and an independent valuer applies the methodology and signs. The accountant assembles normalised financials, add-back schedules with supporting documents, and related-party loan schedules: work they are better placed to do than anyone, and often work that is already largely done. The valuer then spends their hours on methodology selection, comparable evidence and the conclusion, rather than on reconstructing the file from scratch. The result typically costs less than a full-service engagement at a traditional firm, and the signed report carries the independence statement and signing accountability the letter cannot. This is how most accountant-referred Oliver Group engagements run: the accountant's knowledge of the business feeds the analysis, the independence of the conclusion is preserved, fees are fixed at engagement and never contingent on the outcome, and the working file is retained for ten years so the position can be defended if it is ever queried.

What the published packages look like

For comparison against both the letter and the $5,000–$15,000+ traditional-firm report, Oliver Group's fees are published and fixed before work begins. Small-business reports are delivered in 2 business days and medium-business reports in 3 business days, and the delivery date for a Large Business Valuation is agreed before commencement. Delivery time starts once payment and all required information have been received.

The honest trade-off, and where each choice belongs

Honesty cuts both ways. Equally, a report is the wrong purchase when a letter genuinely serves: if the number is for your own planning and nobody adversarial will ever test it, ask your accountant and keep the fee. The whole decision reduces to one question: who has to accept this number, and what happens if they don't? For how a defensible conclusion is actually constructed, see /resources/what-is-the-most-supportable-valuation-position. For who is qualified to sign a business valuation in Australia, and where accountants fit in that picture, see /resources/who-can-value-a-business-in-australia. One closing note: Oliver Group prepares independent valuations only. We are not a registered tax agent, and nothing in this article is tax, legal or financial advice: for how a specific letter, engagement or CGT position will be treated, speak to your accountant or registered tax agent.