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ATO

All valuation factors hard to assess

asset valuation

A fair and reasonable asset valuation, as required by the ATO, may be difficult to prove to the extent required in new guidance.

SMSF advisers and their clients may struggle to meet an ATO requirement to consider all relevant factors when valuing an asset without using expert advice, an SMSF lawyer has warned.

DBA Lawyers senior associate Shaun Backhaus said the recent updates to the ATO valuation guidelines indicate what is needed to ensure an asset valuation is accepted, but it may be difficult to gather evidence to the extent required.

Backhaus pointed out the guidelines state “a fair and reasonable valuation takes into account all relevant factors and considerations likely to affect the value of the asset”, but the extent of these was not defined.

“I think it’s very hard to say whether a valuation is taking into account all relevant factors and considerations that are likely to affect the asset,” he said during a recent webinar.

“It’s something that only a valuer can confidently determine and leads back to how you can confidently say to a client you have taken into account all relevant factors and considerations unless there has been a valuer who has said that.”

He noted the ATO guidelines provided some leeway in the valuing of assets as long as the valuations were not in stark contrast to the expected values and could be backed up with solid evidence.

“[The ATO] will generally accept your determination if there is no evidence that a different value was used for the corresponding capital gains tax event and it was based on objective and supportable data,” he said.

“If the most appropriate valuation method has not been used for any of the assets, it will not be accepted and the most appropriate valuation method will be applied to determine an amended value.”

The asset valuation guidelines were modified on 1 July and replace Superannuation Circular 2003/1, and should be read in conjunction with the ATO’s guide to market valuation for tax purposes (QC21245), he added.

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