The ATO sets out comprehensive requirements of what is expected in a valuation report. These requirements include that the report is understandable, replicable, reasonable and defensible. But what are some of the issues the ATO encounters with valuation reports?
According to the ATO’s 2021 consultation paper “Market value for tax purposes” the ATO sets out some “common issues”:
General issues in valuation reports
According to the consultation paper, the ATO identifies four general issues, these issues relate to documentation, analysis, methodology and assumptions:
- documentation: omitted, insufficient, incorrect, and or inconsistent documentation and evidence
- analysis: lack of appropriate analysis, scrutiny of information and or verification of inputs
- methodology: inappropriate choice and or application of the methodology
- assumptions: unreasonable, unsupported, incorrect, and or inconsistent assumptions
Specific issues
Further, the ATO identifies specific issues including:
- reliance on post-valuation date information and future events which cannot be reasonably foreseeable at the valuation date
- lack of support for size, risk and other adjustments to the chosen discount rate or capitalisation multiple
- inappropriate use of averaging
- the valuation approach does not align with the relevant tax provision, case law or ATO documents
Find out more
To learn more about this topic, please join the upcoming webinar What the ATO expect to see in a business valuation report where an expert panel, including the ATO, will discuss some of these issues.
About the author
Simon specialises in valuing private businesses and quantifying damages.
Simon is a Chartered Accountant Business Valuation Specialist and Forensic Accounting Specialist with Chartered Accountants Australia and New Zealand (CAANZ).
He chairs the CAANZ Business Valuation group for Queensland and is a member of the CAANZ trans‐Tasman Business Valuation Committee.
