Valuations for the margin scheme
For the purposes of the margin scheme, an approved valuation is a valuation that meets the requirements contained in the Margin Scheme Valuation Requirements Determinations MSV 2005/3 and MSV 2009/1.
The determinations contain three possible ways you can value your property:
- an approved valuation
- a valuation based on the payment the seller receives under a contract of sale (if the contract was entered into before the valuation date)
- a valuation prepared by a state or territory department for rating or taxing purposes.
This page has been developed in consultation with the property and valuation industries to help you check that your property valuation is an approved valuation for GST margin scheme purposes.
If you choose to use an approved valuation, it must meet the following standards:
We have included a useful checklist to help you confirm a valuation is an approved valuation.
A valuer is a professional valuer for GST purposes if any of the following apply:
- They are registered or licensed to carry out property valuations under a Commonwealth, State or Territory law.
- They carry on a business as a valuer in a State or Territory where they do not have to be licensed or registered.
- They are any of the following
- a member of the Australian Property Institute (API) and are accredited as a Certified Practicing Valuer
- a member of the Royal Institution of Chartered Surveyors and accredited as a Chartered Valuation Surveyor
- a member of the Australian Valuers Institute and accredited as a Certified Practicing Valuer.
Market value as at valuation date
Property valuers generally adopt the International Valuation Standards Committee's (IVSC) definition of market value and base their valuation on the property's highest and best use.
In the International Valuation Standards (2003), the IVSC defines market value as:
The estimated amount for which an asset should exchange on the date of valuation between a willing buyer and a willing seller in an arm's length transaction, after proper marketing, wherein the parties had each acted knowledgeably, prudently and without compulsion.
A valuer should take into account all known factors at the time the valuation is being prepared that could affect the market value of the property as at the valuation date, including but not limited to:
- the physical and legal state of the property
- interest in the land
- buildings and machinery fixed to the land
- any property rights connected to the property
- the approved zoning.
If the property is contaminated at the valuation date, the valuer should work out its market value based on its contaminated condition on that date. They may only take into account any remediation work or improvements made to the property up to the valuation date.
Generally, the valuation date for the property is either of the following:
- 1 July 2000 – if you held or owned the property before 1 July 2000 and were registered (or required to be registered) for GST at that date
- the date you were registered (or required to be registered) for GST, if you held or owned the property before 1 July 2000 and were not registered (or required to be registered) until after that date.
Even though you must value a property as it was at the valuation date, you don't have to undertake the valuation process on that date.
Find out about:
- GSTR 2006/7 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 2006/8 Goods and services tax: the margin scheme for supplies of real property acquired on or after 1 July 2000
Value of the property interest that existed at the valuation date
You need to obtain the value of the property interest that existed at the valuation date, which may not necessarily be the interest that you are selling. If the interest that existed at the valuation date is different to the interest you are selling you:
- must obtain a value of the interest that existed at the valuation date
- need to apportion that value on a reasonable basis.
Headline Property Group registered for GST on 1 July 2000. It is undertaking a four-stage residential development over three years on land that it has owned since 1996. Each stage of the development will be made up of at least 20 individual allotments. At the valuation date of 1 July 2000, Headline held a single large allotment of land as it had not subdivided the land yet.
Headline should do both of the following:
- obtain the market value of the single large allotment as at 1 July 2000
- apportion this value over the four stages of the development on a reasonable basis.
The value it assigns to each stage cannot exceed the total value of the single large allotment. Once Headline assigns an apportioned value to each stage, it must apportion further to allocate a value to each individual allotment in that stage.
Appa Holdings registered for GST on 1 July 2000. It is developing a residential strata unit complex of 45 units on a single allotment that it purchased in 1997. At the valuation date of 1 July 2000, Appa held the single allotment as vacant land.
- obtain the market value of the vacant allotment as at 1 July 2000apportion this value between the 45 units on a reasonable basis.
The Marshall and Howard partnership registered for GST on 1 June 2007 as they wanted to develop their land into a residential strata unit complex of 12 units. The partnership has owned the land they are planning to develop since 1985. On the land is a residential dwelling that the partnership leased to tenants up until April 2007. As at 1 June 2007, the residential property remains on the land but is unoccupied.
The partnership should:
End of example
- obtain the market value of the property at the valuation date of 1 June 2007 (the interest that existed at the valuation date was land that contained a residential property)apportion this value between the 12 units on a reasonable basis.
Value property before the due date for your activity statement
You must have the property valued before the due date for your activity statement for the tax period you sold (settled) the property.
The signed certificate must specify the:
- full description of the property being valued
- applicable valuation date
- date the valuer provides the valuation to you
- market value of the property at the valuation date
- valuation approach and any calculation
- name and qualifications of the valuer.
Along with the signed certificate, the valuer should provide you with the following information in their written report:
- a description of the asset
- the purpose and context of the valuation
- the date of the valuation
- the method or methods used
- the reasons for the methods used
- the specific value
- the information relied on
- an evaluation of this information
- the assumptions relied on
- an evaluation of these assumptions
- any material risks
- any previous valuations used
- explanations of material differences
- expert reports and the use of experts
- the terms of engagement
- the relationship between the valuer and client
- the working papers
- any disclaimers and indemnities
- the valuer's details and qualifications
- whether the valuer undertook this process according to valuation industry practices.
If the information is not contained in the written valuation report it should be readily available in the valuer's working papers.
A valuation must:
Use this checklist to work out if a valuation provided by a professional valuer for your property is an approved valuation for GST purposes.
Requirements for an approved valuation
Is the person providing you with a valuation a professional valuer?
Do you have a written valuation report?
Does the valuation report detail the valuation process?
Does the valuation provide a market value of the real property interest that existed at the valuation date?
(This may not be the same interest that you are selling.)
If you need to apportion the market value to the interest that you are selling, have you done this on a reasonable basis?
Has the valuer:
- made the valuation according to professional standards
- listed the facts correctly
- used the appropriate valuation methods
- made reasonable assumptions
- taken into account any contamination as at the valuation date?
Does the valuation report contain a signed certificate?
The certificate must include the following information:
- a full description of the property being valued
- the applicable valuation date
- the date the valuer provided the valuation to the supplier
- the market value of the property at the valuation date
- the valuation method and calculation, and
- the name and qualifications of the valuer.
Did you obtain a valuation before you had to report the property sale on your activity statement?