Your accountant wants a market valuation: what it is, who to use and what it costs
What market value means for tax, when it is needed, who should prepare it and what the report must show.
If your accountant wants a market valuation, use an independent business valuer: no role in the transaction, a fee fixed in writing first, and a signed report for the tax rule and date your accountant names. Unless the tax rule defines it differently, market value is what a willing buyer and seller, both informed and dealing at arm's length, would agree on that date. Oliver Group charges from $1,495 + GST.
What is a market valuation for tax purposes?
It is a written estimate of what an asset was worth on a stated date, with the evidence behind it. For tax, market value usually means the price a willing but not anxious buyer and seller, both fully informed, would agree in a notional sale: the High Court's test in Spencer v Commonwealth [1907] HCA 82, as the ATO's Market valuation for tax purposes guide explains it. The tax rule that calls for the value sets the asset and the date.
Why does my accountant need a market valuation?
Because in some transactions the tax law uses market value instead of, or alongside, the price paid, and the ATO's guide expects it to be prepared objectively and supported by credible evidence. These are the common situations. Land and buildings in any of them go to a property valuer.
| Situation | What gets valued | Why a market value is needed |
|---|---|---|
| A gift, or a transfer not at arm's length, such as shares moved within a family | The shares, units or business, at the transfer date | If nothing is received, or the parties did not deal at arm's length and the price differs from market value, market value replaces the proceeds (section 116-30 of the Income Tax Assessment Act 1997) and can set the receiver's cost base (section 112-20). |
| A restructure or roll-over | Each asset or interest that moves | For the roll-over into a wholly-owned company, the market value of the shares you receive must be substantially the same as the market value of the assets you transfer, less the liabilities the company takes over with them (section 122-20(3)(a)). Interposing a holding company requires each owner to keep the same proportion of the total market value before and after (section 615-20(2)). |
| Small business CGT concessions, where you rely on the maximum net asset value test | Your CGT assets, and those of connected entities and affiliates that the test counts, just before the CGT event | Their net value, market value less related liabilities and certain provisions, must not exceed $6 million (sections 152-15 and 152-20). |
| Division 7A: a private company's asset is transferred to, or used by, a shareholder or associate | The asset, such as shares or a business, or its use | The payment is measured at what parties dealing at arm's length would have paid, less anything given for it (sections 109C and 109CA of the Income Tax Assessment Act 1936). |
| Buying out a partner or shareholder | The departing owner's shares, units or interest | Market value can replace the price if the parties do not deal at arm's length (section 116-30). If a company buys shares back off-market for less than their market value (worked out as if the buy-back had never been proposed), the seller is taken to receive market value, which can then be reduced for any dividend component (section 159GZZZQ(2) and (3) of the 1936 Act). |
| An employee share scheme | Shares or options issued to employees | The taxable discount is generally market value less what the employee paid, or market value at a deferred taxing point less cost base (Division 83A of the 1997 Act). |
Who should I use for a market valuation?
An independent business valuer: no stake in the result, no other role in the transaction, and a signed report. The ATO's guide says acceptability usually depends on the valuation process rather than who conducted it, and notes that no admissions body exists for business valuers in Australia. It makes you responsible for a valuer who is knowledgeable and experienced, properly briefed and objective, and who backs the value with credible evidence. Oliver Group is an independent business valuation practice that values businesses, shares and units, never land or buildings.
What should the valuation report contain?
Enough for your accountant, or an ATO reviewer, to follow and test the value. The ATO's guide expects at least the points below, and recommends a cross-check method where possible; that cross-check is not included in our fixed fee. Every Oliver Group report is signed by the valuer responsible, with a concluded value and a supportable range, the method and evidence, assumptions and limitations, and an independence statement. A second valuer reviews it before it is signed.
- ·The purpose and the tax provision
- ·The asset or interest valued
- ·The information and assumptions relied on
- ·The valuation date, and whether it is retrospective
- ·The definition of value
- ·The method and why it was chosen
- ·The concluded value, and why it was chosen from any range
- ·The valuer's identity and a declaration of independence
What does my accountant do with the valuation?
Your accountant applies it. They decide whether a rule, concession or roll-over applies, how the value goes into the return and what tax results. They need no tax advice from the valuer, and we give none: Oliver Group prepares valuations only and is not a registered tax agent. With your agreement the signed report goes to your accountant too, and we answer their questions on the method.
A note for the accountant: what should the instruction say?
Give the purpose and provision, the entity and exact interest, the valuation date and who will rely on the report. The ATO's guide says a value is better supported where the instructions ensured independence, recognised the valuer's right to refuse an opinion without the information needed, gave access to records and set a fee not tied to the outcome.
What should I send?
Nothing to start: send the enquiry form and we reply within one business day, then a fifteen-minute call confirms the package, the fee and the delivery date. Once engaged, we usually ask for:
- ·Your accountant's note of the purpose, provision and date
- ·Three years of financial statements, and accounts to the valuation date
- ·The company extract, share or unit register, and constitution or trust deed
- ·Details of the transaction, any price, and loan accounts with owners
What does a market valuation cost and how long does it take?
Oliver Group's fees are fixed by the annual turnover of the business being valued: under $2 million, $1,495 + GST with the signed report in 2 business days; $2 million to $3 million, $2,495 + GST in 3 business days; $3 million to $10 million, $3,495 + GST in 3 business days; over $10 million, quoted in writing before work starts. Delivery time starts once payment and all required information have been received. Each additional entity is +$795 + GST and each retrospective (past) valuation date +$495 + GST, agreed in writing before work starts. Everyone pays the same published fee. The fee does not cover tax advice, or expert witness work and court appearances, which are a separate engagement agreed first.
- ·Market valuation for tax purposes (guide), ATO
- ·ITAA 1997 s 116-30, ATO legal database
- ·ITAA 1997 s 112-20, ATO legal database
- ·ITAA 1997 s 122-20, ATO legal database
- ·ITAA 1997 s 615-20, ATO legal database
- ·Maximum net asset value test, ATO
- ·ITAA 1936 s 109C, ATO legal database
- ·ITAA 1936 s 109CA, ATO legal database
- ·ITAA 1936 s 159GZZZQ, ATO legal database
- ·ESS: calculating the discount, ATO
Common questions.
My accountant says I need a market valuation for CGT. Who should I use?+
Use an independent business valuer with no role in the transaction, a fee fixed in writing before work starts and a signed report for the provision and date your accountant names. Australia has no licence or formal admissions board for business valuers, as the ATO's guide notes. Oliver Group charges from $1,495 + GST, set by the business's annual turnover.
What is a market valuation for tax purposes?+
It is a written estimate of what an asset, such as a business, shares or units, was worth on a set date, with the evidence behind it. Market value usually means the price a willing but not anxious buyer and seller, both fully informed, would agree, at the date the tax provision sets.
Can my accountant do the market valuation instead?+
Often, yes: the ATO's guide says a valuation's acceptability usually turns on its process, not on who prepared it, though it names some exceptions. The weak point is independence: an accountant who prepared the accounts and acts for you has a relationship the ATO expects the report to declare, which an independent valuer avoids.
Can the valuation be done for a past date?+
Yes. Market value is worked out as at the time of the CGT event, on what was known or could reasonably be foreseen then. Each retrospective (past) valuation date is +$495 + GST, agreed in writing before work starts. We never value at a future date, which the ATO's guide says is not acceptable for tax.
Will the ATO accept the valuation?+
No valuer can promise that, and we do not. An ATO review generally examines how well the process was documented, the market value definition, the method, and the assumptions and information. For more certainty first, you can apply for a private ruling on an asset's market value where it bears on a question about the tax law. The ATO cannot rule on whether a valuation method is appropriate or on the market value for a future event, and you pay any valuation fees it incurs.
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Send the form and we reply within one business day. No documents needed to start.
Small Business Valuation
$1,495 + GST
For a business with annual turnover under $2 million. Signed report in 2 business days. Delivery time starts once payment and all required information have been received. The fee is fixed in writing before we start and never tied to the outcome.
Larger business? Tell us in the form and we recommend the right package. All fees