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There are many situations where valuations are required for tax reasons. In example establishing asset value for SME to qualify for business concessions or for cost base of an asset for capital gains. Also, GST land valuation is quite common in Sydney. But the truth is that not any property valuation will do the job.
The Australian Tax Office often reminds taxpayers not to take their own valuations or use people who don’t have adequate qualifications and certificates. Incorrect information on tax report can lead to many administrative penalties.
Thankfully majority of taxpayers uses qualified property valuers for tax purposes and if they provide them with accurate information, that will make the valuation significantly deficient. They don’t have to worry about any fines or further penalties.
For instance, a property valuation made by a qualified Sydney valuer or an estimate of building cost made by a quantity surveyor are matters that often can be outside the range of professional expertise of a tax agent. The Australian Tax Office considers that relying on good faith in advice of this type is consistent with taking a reasonable care even if later on it turns out to be deficient
ATO warns that there is a potential for administrative penalties when it comes to incorrect statement in the situations when:
· The taxpayer provided an incorrect information to the property valuer so he/she wasn’t able to assess the value accordingly
· The taxpayer or their agent should have known that the statement provided by valuer was incorrect
· Misinterpretation of tax law provision or unclear facts that led the valuer to a wrong judgment
The Australian Tax Office gives us three main examples that provide guidance when it comes to penalties in cases where the false statement arises from valuation problems.
· GST margin scheme
· CGT maximum net asset value test
· Market value substitution
Contact IP Valuation regarding your concerns.