What happens if the ATO disagrees with a valuation?

How an ATO review of a valuation usually runs

The ATO may review the market value used in your tax affairs. Its guidance says a review is more likely where the value is high or the method is contentious, and that it then expects more evidence and explanation.

1. 01The ATO raises its concernsIt explains its concerns and asks for information, often the valuation report and the instructions given to the valuer.
2. 02A valuer checks the workThe ATO generally has a valuer look at the definition of market value used, whether the method suits the asset, and the assumptions and information behind the figure. That valuer may give the ATO an estimate of value or a likely range.
3. 03The ATO decides and tells youThe ATO decides whether to take further action and tells you the outcome in writing. If it settles on a different value, it can amend your assessment.
4. 04You can objectAn objection is made in writing and must explain why the decision is wrong. Time limits run from 60 days to 4 years, depending on the decision and the taxpayer.
5. 05Independent reviewIf you are not satisfied with the objection decision, you can usually ask the Administrative Review Tribunal to review it or appeal to the Federal Court. There you are expected to prove your case with evidence, generally on the grounds in your objection.

What a different value can cost

A different market value changes the gain or loss, and so the tax. Where tax has been underpaid, interest charges can apply. Penalties are a separate question.

The ATO says relying in good faith on expert advice outside your own expertise, such as a real property valuation, is consistent with reasonable care, even if the advice proves deficient. Penalties could still apply if you did not give the valuer correct information, if you or your agent should reasonably have known the value was wrong, or if the valuation rests on an unsettled reading of the law or unclear facts.

Why this matters for a 30 June 2027 value

Under the 2027 changes, Australian resident individuals and trusts with at least one eligible beneficiary are treated as selling and buying back assets held through 30 June 2027 at their market value just before 1 July 2027, unless they choose an apportioning method, once one is made. The gain to that date is deferred until a later CGT event, usually a sale.

So a 30 June 2027 value may first come under scrutiny with the return for the year you sell, which could be many years away. The report has to explain itself by then. The issues the ATO says it commonly finds point to what holds up:

• A method that suits the business, with the reasons it was chosen
• Stated assumptions, with support for any risk or size adjustments
• Inputs checked against records, and those records kept with the report
• Only information known or reasonably foreseeable at the valuation date
• Written instructions showing the valuer was independent and the fee did not depend on the result

A valuation as at 30 June 2027 is prepared after that date, once your records to 30 June 2027 are available. You can book your place now.

Options before you lodge, and help after

Where the value is large or the facts are unusual, your tax adviser may consider a private ruling: you give the ATO a valuation and ask it to confirm it, and you pay any valuation fees the ATO incurs. It will not rule on the method or on a value for a future event. The ATO also describes joint valuations, where you and the ATO appoint one independent valuer and share the cost.

Independent Business Valuation prepares a reasoned, documented report as at the agreed date, but no valuer can promise the ATO will agree. Your tax adviser manages any review or objection. A report prepared for tax purposes is not a court expert report, so tribunal or court work is a separate engagement with its own fee.