ATO on penalties and valuations

The ATO has published information on penalties and valuations. It says that taxpayers who undertake their own valuations, or use valuations from people without adequate qualifications, risk incorrectly reporting their tax and may be liable to pay administrative penalties. Valuations are of particular relevance for the GST margin scheme, the CGT maximum net asset value test and the CGT market value substitution rule.

The ATO says that the majority of taxpayers who use a qualified valuer or equivalent professional for taxation purposes will generally not be liable to a penalty if they have provided the valuer with accurate information where the valuation ultimately proves to be deficient. For example, a real property valuation prepared by a qualified valuer or an estimate of historical building cost made by a quantity surveyor are matters that are likely to be outside the range of professional expertise of a tax agent or taxpayer. Relying in good faith on advice of this nature is consistent with the taking of reasonable care even though the advice later proves to be deficient.

When using a valuer or qualified professional, there may be the potential for administrative penalties for making a false or misleading statement or for treating the income tax law in a manner that is not reasonably arguable if:

  • the taxpayer has not given correct information to the valuer to allow them to correctly assess the value of the item for the period required
  • the taxpayer or their agent should reasonably have known that the information provided by the value was incorrect, or
  • the methodology or valuation hypothesis used by a qualified valuer may be based on an unsettled interpretation of a tax law provision or unclear facts.

Source: CCH Website