Show download pdf controls
  • ATO advice and guidance on market value

    The tables below list ATO advice products and commonly used valuation methods for different types of valuations:

    See also:

    Products based on the nature of the transaction or event

    Nature of transaction

    Examples of tax context

    ATO products (not exhaustive)

    Capital gains tax (CGT) events generally

    Wherever market value is required

    TD 10W: Capital Gains: What are acceptable valuations for CGT purposes?

    TD 97/1: 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?

    Capital gains tax (CGT) events generally

    Transfers to related parties

    Transferring real estate to family or friends

    Capital gains tax (CGT) events generally

    Defining an asset

    TR 2004/13: Meaning of an asset for the purposes of Part 3-90 of the Income Tax Assessment Act 1997

    Share buy-backs

    Valuing shares in buy-backs

    TD 2004/22: 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 2007/9: Share buy-backs

    Unlisted shares for ESS schemes

    Form for completion by a registered company auditor.

    Declaration of the value of unlisted shares

    Trading stock

    Valuation of land as trading stock in property development

    Valuation of land that is ventured into a property development

    TD 92/132: 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?

    TD 97/1: 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?

    Allocation of value to underlying assets

    Disposals and transfers of more than one asset for a single undivided amount

    TD 9: Capital gains: How do you apportion consideration received on the disposal of a composite asset?

    GST margin scheme

    Taxable supplies of real property

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

    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

    Consolidated entities

    Consolidation events generally – including entries, exits, cost base setting and determining the allowable fraction

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

    TD 2007/1: 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: 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 under subsection 705-35(3) of that Act?

    Self-managed superannuation funds

    Valuing fund assets

    Valuation guidelines for self-managed super funds

    Research and development concession

    Value of contributions to R&D

    IT 2451: Income tax: Investor funding of research and development activities – paragraphs 12-14

    Fringe benefits tax

    Car parking fringe benefits

    TR 96/26: Fringe benefits tax: car parking fringe benefits – paragraphs 46 and 50

    Products and methodologies based on asset class

    Components

    Examples of tax context

    ATO product

    Commonly adopted methods

    Real property:

    All types of land, with or without buildings and improvements

    Rights associated with land, including leases and licences to occupy

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

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

    TD 97/1: 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 97/25: Income tax: property development: deduction for capital expenditure on construction of income producing capital works, including buildings and structural improvements

    TD 92/132: 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 real estate to family or friends

    Direct comparison.

    Capitalisation of net income.

    Discounted cash flow analysis.

    Real property:

    GST margin scheme

    Taxable supplies of real property

    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

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

    GST margin scheme valuation requirements determination MSV 2005/1

    GST margin scheme valuation requirements determination MSV 2009/1

    Direct comparison.

    Capitalisation of net income.

    Discounted cash flow analysis.

    Real property:

    GST margin scheme

    Margin scheme valuation

    GST margin scheme valuation requirements determination MSV 2015/53 extends the cost of completion method in MSV 2000/2 to partly completed premises supplied on or after 1 July 2005

    Other MSVs may apply to prior periods not covered under MSV 2009/1 and MSV 2015/53 – see GST and the margin scheme

     

    Plant and equipment 

     

     

    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 

    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:

    Equity

    Hybrid

    Debt

    CGT rollovers

    Cost base setting

    Entries into consolidated groups.

    Exits from consolidated groups.

    TD 2004/22: 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 2007/9: 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:

    Identifiable intangible assets

    Intellectual property

    Goodwill

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

    TD 2007/1: 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: 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?

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

    Common specific approaches:

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

     

    Commonly used valuation methods for selected securities

    Event or transaction description

    Legislative references and ATO guidance (not exhaustive)

    Selected valuation approaches under certain circumstances (see Note 1)

    Off-market takeovers

    ITAA 1997:

    • subsection 124-800(1)
    • subsection 116-20(1)
    • subsection 124-790(1)
    • para 110-25(2)(b)
    • TD 2002/4

     

    From the time that the bid becomes unconditional, closing price at the time of acceptance, up to and including the deemed effective date of compulsory acquisition

    Merger/scrip restructure via a scheme of arrangement

    ITAA 1997:

    • subsection 124-800(1)
    • subsection 116-20(1)
    • subsection 124-790(1)
    • para 110-25(2)(b)
    • subsection 124-780(5)

     

    1-day volume weighted average price (VWAP) on implementation date of scheme.

    Demergers

    ITAA 1997:

     

    For cost base allocation – five-day VWAP from the commencement of trading.

    Equal capital reductions

    ITAA 1997:

    • subsection 116-30(3A)

     

    Closing price or 1-day VWAP or 5-day VWAP.

    Selective capital reductions

    ITAA 1997:

    • subsection 116-30(3A)

     

    Establishment of market value under ss 116-30(3A).

    Employee share acquisition schemes

    ITAA 1936:

    • former section 139FB

     

    Establishment of arm's length value under former s 139FB of the ITAA 1936 which has continued application under the IT(TP)A 1997.

    Off-market buy-backs

    ITAA 1936:

     

    Establishment of market value under ss 159GZZZQ(2) of the ITAA 1936.

    Note 1: The selected valuation approaches should not be taken as definitive guidance and will vary depending on the particular case. We recommend you contact us to discuss the circumstances in more detail before seeking a ruling.

    See also:

      Last modified: 18 Aug 2017QC 21245