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The risk of an inaccurate valuation can be affected by the professionalism and competence of the valuer. The ATO considers it good practice for the valuer to have:
- acted independently by operating at arm's length of the authority, control or influence of the taxpayer. This would apply equally to in-house and external valuation experts
- the appropriate experience. While there is no test of what is 'appropriate experience' it is good practice for a valuer to provide, as a matter of course, their resume when providing a written valuation. This will help to inform all who read it whether the stated experience indicates a competence befitting the scale of the valuation undertaken
- the relevant educational qualifications and professional expertise, and
- used methods consistent with best practice principles in line with industry standards.
The ATO recognises that the availability of suitably qualified and competent valuers will affect both who undertakes the valuation and when it is done. The closer the valuation is reasonably done to 1 May 2010 the better to ensure availability of data and to minimise impacts of hindsight influencing the valuation as at that date. However, it is recognised that many taxpayers cannot or will not be able to commit to the cost of an independent valuation until there is a reasonable level of certainty in respect of the extended PRRT legislation. Accordingly, valuations undertaken up to the due date for lodgment of the starting base return in respect of assets in existence at 1 May 2010 will be considered by the ATO to be done in a reasonably contemporaneous manner.
While the ATO considers it good practice for the taxpayer to use an external valuer, it also recognises that in-house valuers may be used for a range of reasons, including the availability of external valuers or lack thereof, and the existence of strong in-house valuation expertise. Further, it is recognised that if an external valuer is used, it is likely that the technical information that they rely on is provided by in-house expertise.
Where an in-house valuer is used, the ATO would also consider their professionalism, competence and independence by observing whether:
- a professional relationship exists between the in-house valuer and their employer
- the in-house valuer acts strictly in a manner that is independent of their employer in respect of the valuation
- the principles of materiality, competence, independence and transparency are followed in accordance with industry valuation practice
- the taxpayer has engaged an independent expert to corroborate the work of the in-house valuer, for example, in relation to the methods used, assumptions adopted, processes followed and data relied upon, and
- appropriate documentation is given to and retained by the taxpayer.
In the absence of resource-industry specific valuation qualifications, the ATO considers it good practice that the taxpayer be able to demonstrate that the in-house valuer used has experience, skills, and professional standing consistent to the greatest extent possible with the principles in the VALMIN Code.