Valuation for Capital Gains Tax Purposes: When You Need One and Why
- Propti
- Jan 19
- 3 min read
A valuation for capital gains tax (CGT) purposes is an independent property valuation used to determine the market value of a property at a specific point in time for calculating capital gains tax. It is commonly required when a property is sold, transferred, inherited, or changes use.
In many CGT scenarios, the purchase price is not available or cannot be used — making an independent valuation essential for tax compliance.
What Is a Valuation for Capital Gains Tax Purposes?
A valuation for capital gains tax purposes is a formal valuation report prepared by a qualified, independent property valuer. It establishes the market value of a property as at a particular date, which is then used to calculate capital gains or losses.
A Propti CGT valuation is prepared to meet ATO expectations and can be relied upon by accountants, advisers, and taxpayers.
When Is a CGT Valuation Required?
A valuation for capital gains tax purposes is commonly required in the following situations:
Inherited or Deceased Estate Properties
Establishing market value at the date of death
Calculating CGT when the property is later sold
Pre-CGT Properties
Properties acquired before 20 September 1985
Establishing market value at the first taxable event
Change of Use
When a main residence becomes an investment property
When an investment property becomes a main residence
Related Party Transfers
Transfers between family members
Transfers involving trusts, companies, or SMSFs
No Clear Purchase Price
Gifts of property
Off-market transfers
Nominal consideration transactions
In these cases, the ATO generally requires CGT to be calculated using market value, not the amount paid.
Why Market Value Matters for Capital Gains Tax
The ATO applies the market value substitution rule in many CGT events. This means if a transaction is not at arm’s length, or there is no reliable purchase price, market value must be used.
An independent valuation:
Reduces audit risk
Supports accountant calculations
Provides defensible evidence if reviewed
Who Can Prepare a CGT Valuation?
A valuation for capital gains tax purposes must be prepared by:
A certified practising valuer
An independent and appropriately qualified professional
A valuer experienced in retrospective and statutory valuations
Real estate agent appraisals are not sufficient for CGT purposes.
What Does a Capital Gains Tax Valuation Report Include?
A CGT valuation report typically includes:
Property description and ownership details
Market value assessment at the relevant date
Comparable sales analysis
Valuation methodology
Assumptions and limitations
Valuer certification and compliance statements
A Propti valuation for capital gains tax purposes is structured so accountants can confidently rely on the valuation when calculating CGT.
Can You Get a Retrospective Valuation?
Yes. Many CGT valuations are retrospective, meaning the valuation is completed today but reflects the market value at a past date.
This is common for:
Deceased estates
Change-of-use events
Historic ownership transfers
An experienced valuer can assess historical market data to determine accurate past values.
Is a CGT Valuation Worth It?
In most cases, yes. A CGT valuation can:
Prevent incorrect CGT calculations
Reduce the risk of penalties or reassessments
Provide certainty for long-term tax planning
The cost of a valuation is often small compared to the potential tax impact of an incorrect market value.
How to Order a Valuation for Capital Gains Tax Purposes
The process generally involves:
Providing property and CGT event details
Confirming the required valuation date
Independent analysis by a certified valuer
Delivery of a compliant CGT valuation report
You can order a valuation for capital gains tax purposes through Propti, with reports prepared for accountant, legal, and ATO use.
Final Thoughts
A valuation for capital gains tax purposes is a critical compliance tool whenever market value is required to calculate CGT. Without an independent valuation, taxpayers may be exposed to incorrect tax outcomes or ATO scrutiny.
If you’re dealing with a property sale, transfer, inheritance, or change of use, obtaining a professional CGT valuation is a smart and often necessary step.
