Getting a tax valuation from the ATO
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 we can help you access.
Under the tax law, you can apply for a private ruling about the value of a thing, 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:
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:
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.
We 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 (ask us for a copy), 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:
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 a thing, the following occurs:
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:
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.
The ATO generally does not ask the valuer to do the work until payment is received. Once the ATO receives your payment, it will:
The receipt the ATO issues is also a tax invoice – we may be able to claim for you 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:
It will then either:
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.
Contact us if you need assistance in this area.
Hillyer Riches Management Pty Ltd , accountants and advisors located in Caulfield, is a Corporate Authorised Representative (No 466483) of Capstone Financial Planning Pty Ltd. ABN 24 093 733 969. AFSL / ACL No. 223135.This document contains general advice only and is not personal financial or investment advice. Also, changes in legislation may occur frequently. We recommend that our formal advice be obtained before acting on the basis of this information.