There have been a number of court decisions in recent times
focused on the way in which valuations are conducted for the purposes of
satisfying (what is currently) the ‘$6M net asset test’ for the small business
capital gains tax concessions.
The Tax Office has recently released a Decision Impact Statement following one of the cases from last year (for a full copy of the statement, please email me).
In the statement the Tax Office has confirmed that its
publication ‘market valuation for tax purposes’ provides the guidance that it
believes should be followed in order to establish a market value for tax
purposes.
In particular, the Tax Office states that it believes market
value should be determined with reference to the ‘highest and best use’ of each
asset being assessed.
While generally the sale price of an asset will be its
market value, the Tax Office believes that each situation must be considered on
a case by case basis to determine the most appropriate methodology for
determining market value.
Often this will lead to reference to the long standing
concept of ‘what a desirous buyer would have paid as a fair price to a willing
vendor who was not necessarily desirous (or over anxious) to sell’.
Until next week.
