• Table 2: Products and methodologies based on asset class

    Real property

    Components

    Examples of tax context

    ATO product

    Commonly adopted methods

    All types of land, with or without buildings and improvements

    Rights associated with land, including leases and licences to occupy

    Partially completed developments (GST margin scheme)

    First element of cost base under ss110-25(2) ITAA 1997

    Capital proceeds using the market value substantiation rule: s116-20 ITAA1997

    TD 97/1External Link: Income tax: property development: if land, originally acquired as a capital asset, is later ventured into a business of development, subdivision and sale, how is the market value of the land calculated at the time it is ventured into the business?

    TR 97/25External Link: Income tax: property development: deduction for capital expenditure on construction of income producing capital works, including buildings and structural improvements

    TD 92/132External Link: Income tax: property development: if land is trading stock, do related interest costs, council rates and land taxes, form part of the cost price for trading stock valuation purposes?

    Transferring of real estate to family or friends

    Direct comparison.

    Capitalisation of net income.

    Discounted cash flow analysis.

    GST margin scheme

    GSTR 2006/7External Link: Goods and services tax: how the margin scheme applies to a supply of real property made on or after 1 December 2005 that was acquired or held before 1 July 2000

    GSTR 2006/8External Link: Goods and services tax: the margin scheme for supplies of real property acquired on or after 1 July 2000

    GSTR 2000/21External Link: Goods and services tax: the margin scheme for supplies of real property held prior to 1 July 2000

    MSV 2005/1External Link: A new tax system (goods and services tax) margin scheme valuation requirements Determination MSV 2005/1

    MSV 2000/1External Link: A new tax system (goods and services tax) margin scheme valuation requirements Determination (No.1) 2000

    MSV 2000/2External Link: A new tax system (goods and services tax) margin scheme valuation requirements Determination (No.2) 2000

    GST essentials

    Plant and equipment

    Components

    Examples of tax context

    ATO product

    Commonly adopted methods

     

     

     

    Going concern – based on optimised depreciated replacement cost.

    Disposal of surplus assets/orderly realisation of assets: based on auction realisable value less costs of sale.

    Business

    Components

    Examples of tax context

    ATO product

    Commonly adopted methods

     

    First element of cost base under ss110-25(2) ITAA 1997

    Capital proceeds using the market value substantiation rule: s116-20 ITAA 1997

    CGT rollovers

    Asset sales or divestments

    Cost base setting

    Entries into consolidated groups

    Exits from consolidated groups

    Thin capitalisation

     

    Common specific approaches:

    • comparable transaction
    • comparable trading
    • capitalisation of earnings
    • discounted cash flow, and
    • calculation of net assets.

    (These methods will often overlap.)

    Securities

    Components

    Examples of tax context

    ATO product

    Commonly adopted methods

    Equity

    Hybrid

    Debt

    CGT rollovers

    Cost base setting

    Entries into consolidated groups.

    Exits from consolidated groups.

    TD 2004/22External Link: Income tax: for off-market share buy-backs of listed shares, whether the buy-back price is set by tender process or not, what is the market value of the share for the purposes of subsection 159GZZZQ(2) of the Income Tax Assessment Act 1936?

    PS LA 2007/9External Link: Share buy-backs

    Common specific approaches:

    • business valuations adjusted for the relevant security interest
    • trading benchmarks (eg VWAP/closing price)
    • security based discounted cash flow.

     

    Intangible assets

    Components

    Examples of tax context

    ATO product

    Commonly adopted methods

    Identifiable intangible assets

    Intellectual property

    General examples can include:

    CGT rollovers

    Asset sales or divestments

    Cost base setting

    Entries into consolidated groups

    Exits from consolidated groups, and

    Capital allowance issues relating to IP.

    TR 2005/17External Link: Income tax: goodwill: identification and tax cost setting for the purposes of Part 3-90 of the Income Tax Assessment Act 1997

    TD 2007/1External Link: Income tax: consolidation: in working out the market value of the goodwill of each business of an entity that becomes a subsidiary member of a consolidated group, should the value of related party transactions of each business of the entity be recognised on an arm's length basis?

    TD 2007/27:External Link Income tax: consolidation: is the cost base of the goodwill referred to in subsection 711-25(2) of the Income Tax Assessment Act 1997 limited to the cost base of goodwill previously identified under subsection 705-35(3) of that Act?

    Common specific approaches:

    • comparable transaction
    • incremental income
    • excess earnings
    • relief from royalty
    • replacement/reproduction cost, and
    • simulation analysis.

     

    Goodwill

    TR 1999/16External Link: Income tax: capital gains: goodwill of a business

      Last modified: 01 Jul 2015QC 21245