Getting a tax valuation from the ATO
We all know that the ATO is the guardian of the tax laws, administers tax regulations and can provide advice and guidance on how they apply. But ....
.... not every personal situation fits neatly with the tax laws as they stand. Sometimes, an individual may need help understanding and meeting their tax obligations. In such circumstances, private rulings are one form of ATO advice that you can access.
Under the tax law, you can apply for a private ruling about the value of an asset, such as an item of plant. Particularly under capital gains tax, there are a number of instances where a valuation may be necessary.
In doing this, there are two choices:
- ask the ATO to provide the valuation, or
- provide the ATO with a valuation of the item and ask it to confirm that valuation.
The ATO may take the option to use a professional valuer to undertake or review your own valuation. The valuer usually charges the ATO a fee, which the law allows it to pass onto you. Consequently, when you apply for a private ruling requiring a valuation, it is also required that you pay for the work of the valuer.
The ATO cannot provide a private ruling to determine or confirm either the:
- appropriateness of a valuation methodology, or
- value for a future event.
Cost to you for valuation
Whenever the ATO uses a professional valuer, it will first give an estimate of how much the valuer will charge. This amount is generally required to be paid before the ATO will proceed.
You can however withdraw your application for a private ruling if you do not want to proceed with, or pay the cost of, the valuation, which will be confirmed in writing by the ATO. If however the valuation work has already started, it will generally be required that you pay for the work already undertaken.
If you provide the ATO with a valuation that meets the requirements set out in the ATO guidance Market valuation for tax purposes, it will generally cost less to confirm it than to undertake a new valuation.
If the ATO decides that the valuation you have provided is not acceptable, before it issues a private ruling the ATO will ask if you want to either:
• submit a new valuation for review, or
• ask the ATO to provide the valuation.
You will need to pay any further costs the professional valuer charges to the ATO. And if the ATO does not receive any such advice, it generally will issue a private ruling stating that your valuation is not acceptable and that it will not provide an alternative valuation.
What happens when applying for a private ruling about the value of an item?
When the ATO receives the application for a private ruling that asks to determine or confirm the value of an asset, the following occurs:
- if it needs to use a professional valuer, before it starts the valuation process it will tell you, and ask you to agree in writing, to use a professional valuer
- it will ask for your input when selecting and instructing a valuer
- it will ask the professional valuer to provide a quote for the work – either to value the thing, or to review the valuation that has been supplied
- the ATO will provide you, perhaps via your tax agent, with a copy of the valuer's quote, which contains
- the cost of their work
- the time it will take to provide a report
- any additional information they require to complete the work.
For complex valuation cases, the valuer may need to do the work in stages. In these situations, they will provide a quote for each stage before starting work on it. And before the valuer starts work, the ATO will ask you to:
- pay the estimated amount for the relevant stage, and
- provide any additional information the valuer requests.
Within 28 days of receiving the quote, you need to pay the quoted amount, which may be the whole amount or the amount for the stage in question.
he ATO generally does not ask the valuer to do the work until payment is received. Once the ATO receives your payment, it will:
- ask the valuer to start the work, and
- send you a receipt for your payment.
The receipt the ATO issues is also a tax invoice – and note that you may be able to claim the GST included in the valuer’s fee as a GST credit. Also note that as the cost of the valuation work is considered to be a cost of managing your tax affairs, it may be deductible for income tax purposes.
The ATO will tell you:
- when the valuation is finished or confirmed, and
- if there are any changes to the final cost of the valuation or review.
It will then either:
- refund any extra amount you paid, or
- ask you to pay any shortfall.
If there is a shortfall, this will need to be paid this before the ATO will provide your private ruling. Generally however, it can complete your private ruling within 28 days of receiving the valuer's report.
Private rulings involving a valuation may take longer than other private rulings because of the possibility of having to engage a professional valuer. Generally, the ATO will make contact within 14 days of receiving such an application to discuss an appropriate reply date.
Tax & Super Australia