Valuations for tax | Business Appraisal

iWhen

When the ATO looks for a market value

Situations named on the ATO’s pages. The list is not complete; the ATO says a valuation may be needed for many purposes.
Situation	Why market value matters
Selling, transferring or gifting to family or friends	If what you received differs from market value and you were not dealing at arm’s length, you are treated as having received market value for CGT. This is the market value substitution rule. The ATO names two exceptions: on a transfer to a former spouse on the breakdown of a marriage or relationship the rule may not apply, and on a transfer for no payment to the trustee of a special disability trust any capital gain or capital loss can be disregarded.
Claiming the small business CGT concessions	One way to qualify is the maximum net asset value test, which adds up the market values of CGT assets less related liabilities.
Employee share schemes	Employees receiving shares or options under a scheme may need a market valuation.
Starting to use your home for rent or business	Listed by the ATO as a time a market valuation may be needed.
Consolidating for income tax	Businesses that consolidate may need a market valuation.

iiThe asset test

The maximum net asset value test

As at October 2026, the test is passed if, just before the CGT event that produces the gain, the CGT assets held by you, by entities connected with you, by your affiliates and by entities connected with your affiliates add up to a net value of no more than $6 million. The ATO notes the $6 million limit is not indexed for inflation. An affiliate’s assets, and those of entities connected with an affiliate, count only if they are used, or held ready for use, in a business run by you or an entity connected with you, and the ATO lists further assets to leave out, such as the shares, units and other interests, apart from debt, that you hold in an entity connected with you or your affiliate, though any liabilities relating to those excluded interests are still included.

Net value means the market values of those assets less related liabilities, and less provisions for annual leave, long service leave, unearned income and tax liabilities. If you are an individual, assets used solely for the personal use and enjoyment of you or your affiliate, and your home to the extent you use it for private purposes, are left out.

It is one of the ways to meet the first eligibility step. Another is to be a CGT small business entity with aggregated turnover of less than $2 million, as at October 2026. The ATO’s eligibility overview sets out the rest.

iiiThe report

What the ATO expects a valuation report to contain

At a minimum, the ATO says a valuation report should contain:

the purpose of the valuation
its scope
details of the asset being valued
the date it was conducted
whether it is a retrospective valuation
the date of inspection, if there was one
records explaining the basis of the market value
the value

The fuller guide adds more, including the standards governing the engagement, such as the International Valuation Standards or APES 225, the approaches chosen and why, and any cross-checks.

The instructions to the valuer

The ATO says that when you engage a valuer you need to be able to show you have:

set out the scope and purpose
acknowledged the valuer’s independence to draw conclusions and write the report
recognised the valuer can refuse an opinion if not given the information needed
given access to premises and records, and all necessary help
stated that any fee does not depend on the report’s outcome

These are usually set out in a written request or letter of engagement.

ivResponsibility

Who carries the risk

The onus of a replicable and defensible valuation stays with the taxpayer, even when a professional prepares it. As a general rule, a taxpayer who hires a professional valuer and instructs them properly won’t face penalties if the ATO later finds that valuation deficient. Doing your own valuation, or using someone without adequate qualifications, risks incorrect reporting and possible interest and penalties.

A review is more likely when the asset’s value is high or the method is contentious, and the ATO treats intangible assets as more likely to increase risk.

Asking the ATO first

A private ruling on market value is one option. The ATO can produce the valuation itself, or check one you supply, and whatever it pays a valuer for that work is charged back to you. It will not rule on whether a methodology is appropriate, or on a market value for a future event. A joint valuation is another route: you and the ATO appoint and instruct a valuer together and share the cost.

Keeping the papers

Keep the valuation report and the records behind it: the ATO says you will need them to support the valuation if it later reviews your tax affairs. Records of a business sale are kept for five years from when they were prepared or obtained, or the transaction was completed, whichever is later.