Date posted: 30/08/2022

What does the ATO expect to see in a business valuation report?

On 11 August 2022, CA ANZ held a panel discussion based on the ATO’s consultation paper entitled “Market Value for tax purposes guide”.

In brief

  • On 11 August 2022, a CA ANZ panel discussed ATO guidance on market value
  • The ATO’s guide will undergo an update based on consultation feedback
  • Panellists agreed the narrative underpinning the valuation was the most important aspect of a business valuation report

On 11 August 2022, CA ANZ held a panel discussion based on the ATO’s consultation paper entitled “Market Value for tax purposes guide” which was issued in August 2021. CA ANZ provided feedback to the ATO regarding this guide in 2021.

A panel consisting of CA Business Valuation Specialists; Simon Cook CA, Adam Giliberti CA, Fiona Hansen CA, together with Michael Patane, Peter Murray FCA, and ATO Senior Valuation Adviser Darren McDonald looked at the intent of the guide and what it means for valuation professionals.

The ATO states that the purpose of the guide is to help taxpayers and their advisers understand the Commissioner’s general expectations associated with providing market valuations for tax purposes. 

The ATO panellist, Darren MacDonald provided an update on the guide, saying that feedback on the consultation paper has helped the ATO flesh out some points of guidance, as well as improving navigation and some cosmetic aspects. The revised guide is expected to be released shortly, with the ATO indicating late September.

The panel discussion also covered the important point regarding the basis of value, concluding that there were not-so-obvious differences between ‘market value’ and other standards of value. As such, the International Valuations Standards were cited as a good place to start when considering which standard of value is the most appropriate for the purpose and circumstance of a valuation. 

While the ATO expects ‘market value’ to be used in valuations undertaken for tax purposes, this is not mandated in the tax law. Rather, this is an indication that the ATO expects the emphasis to be placed on ‘market’ evidence in support of a valuation, indicating that market values can fluctuate, depending on market conditions.

While all aspects of the valuation report – including who prepared the valuation report, the valuer’s qualifications, possible conflicts of interest, and report structure – were deemed important, panellists agreed the critical aspect is the consistency of the narrative presented.

The ATO panellist emphasised that the story underpinning the valuation opinion provided key evidence to the ATO as to whether the valuation is appropriate or not. Any conflicts or lack of expertise would be evident from the ATO’s review of the whole valuation report, so it was the story supporting the valuation that added the most credibility.

More information

Access ATO information on “Market valuation for tax purposes”

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CA ANZ’s submission 

Access CA ANZ’s submission on the ATO Consultation Paper Market value for tax purposes 

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International Valuation Standards

Access the International Valuation Standards (member login required)

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