If you're using the valuation method to sell property under the margin scheme, you must use an approved method of valuing your property.
There are three valuation methods available:
- a valuation by an approved valuer
- 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.
For properties that are partly completed at the valuation date, use the value in writing from a professional valuer.
A valuation must include all of the following:
- objectively show the valuer undertook the valuation process according to valuation industry practices
- be documented and explained well enough for another valuer to understand how outcome was worked out and replicate the process.
You must have a valuation by the due date for lodging your activity statement for the tax period the sale applies to.
- MSV 2005/3 Margin Scheme Valuation Requirements Determination
- MSV 2009/1 Margin Scheme Valuation Requirements Determination
- MSV 2020/1 Margin Scheme Valuation Requirements Determination
Approved valuations must:
- be undertaken by a professional valuer
- provide the market value of the property as at the valuation date
- include a signed certificate
- be provided as a written report
Our checklist can help you confirm a valuation is an approved valuation.
A professional valuer is any of the following:
- a person registered or licensed to carry out real property valuations under a Commonwealth, state or territory law
- a person who runs a business as a valuer in a state or territory where they aren't required to be licensed or registered
- a person who is a member of the
- Australian Property Institute and accredited as a Certified Practicing Valuer
- Royal Institute of Chartered Surveyors and accredited as a Chartered Valuation Surveyor
- Australian Valuers Institute and accredited as a Certified Practicing Valuer.
Property valuers generally adopt the International Valuation Standards Committee's (IVSC's) definition of market value and base their valuation on the property's highest and best use.
A valuer should take consider all factors when the valuation is prepared that could affect the market value of the property 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 consider remediation work or improvements to the property up to the valuation date.
Generally, the valuation date is either:
- 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 weren't registered (or required to be registered) until after that date.
Even though you must value a property as it was at the valuation date, it doesn't have to be done on that date.
Value of property interest that existed at the valuation date
If the interest that existed at the valuation date is different to the interest you're selling, you:
- must get a value of the interest that existed at the valuation date
- need to apportion that value on a reasonable basis.
Example 1: Valuation of each separate lot can't exceed total value of the single lot
Morgan Group registered for GST on 1 July 2000. It's undertaking a four-stage residential development over three years on land it owned since 1996. Each stage of the development is at least 20 separate lots. At the valuation date of 1 July 2000, Morgan Group held a single large lot of land as it wasn't subdivided yet.
Morgan Group must:
- get the market value of the single large lot at 1 July 2000
- apportion this value over the four stages of the development on a reasonable basis.
The sum of the values it assigns to each stage can't exceed the total value of the single large lot.
Once Morgan Group assigns an apportioned value to each stage, it must allocate a value to each individual lot in that stage.End of example
Example 2: Apportionment on a reasonable basis
DP Dev registered for GST on 1 July 2000. It is developing a residential strata unit complex of 45 units on a single lot purchased in 1997. At the valuation date of 1 July 2000, DP Dev held the single lot as vacant land.
DP Dev must:
- get the market value of the vacant lot at 1 July 2000
- apportion this value between the 45 units on a reasonable basis.
Example 3: Partnership requires valuation at GST registration and apportions value on a reasonable basis
The Tower and Wilson partnership registered for GST on 1 June 2007 as they wanted to develop their land into a residential complex of 12 strata units. The partnership owned the land since 1985.
A residential dwelling is on the existing land the partnership leased to tenants up until April 2007. At 1 June 2007, the residential property is unoccupied.
The partnership should:
- get the market value of the property at 1 June 2007 (the existing interest at the valuation date was land with a residential property)
- apportion this value between the 12 units on a reasonable basis.
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 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 isn't in a written valuation report it should be readily available in the valuer's working papers.
- The person providing you with a valuation must be a professional valuer.
- You must hold a written valuation report.
- The valuation report must detail the valuation process.
- The valuation provides a market value of the real property interest existing at the valuation date (which may not be the same interest being sold.)
- Apportionment to the market value must be done on a reasonable basis.
- The valuer must
- make the valuation according to professional standards
- list the facts correctly
- use the appropriate valuation methods
- make reasonable assumptions
- consider contamination as at the valuation date.
- The valuation report must contain a signed certificate.
- You should hold a valid valuation before reporting the property sale on your activity statement.
You must have the property valued before the due date for your activity statement for the tax period you sell (settle) the property.
There may be exceptional circumstances preventing you from getting a valuation by your activity statement due date. If you have made an oversight, we may allow a short period for you to get an approved valuation.
If you have an approved valuation by your activity statement due date and you work out the margin based on that valuation, you can't later change to either:
- another valuation
- a different method of valuation
- an amount based on your purchase price (the consideration method).
- PS LA 2005/16 Further period to make an approved valuation for the purposes of working out the margin for the supply under Division 75 of the A New Tax System (Goods and Services Tax) Act 1999
If you sold your property under the margin scheme before 29 June 2005 and used the valuation method to work out the margin, different valuation methods may apply.
Different valuation methods are in the following Margin Scheme Valuation Determinations:
- MSV 2000/1 Completed premises
- MSV 2000/2 Partly completed premises
- MSV 2005/1 Additional valuation method
- MSV 2015/53 Costs of completion method