What Is a Capital Gains Tax Valuation?

A capital gains tax valuation is a formal assessment of a property's market value, prepared by a qualified valuer for the purpose of calculating CGT. The ATO requires these valuations to be accurate, evidence-based, and conducted by a suitably qualified professional.

Here's the thing: CGT valuations come in two forms. A current valuation assesses the property's market value at the date of inspection. A retrospective valuation determines the property's value at a specific date in the past, such as when you first rented out your home or when you inherited the property. Both types are used to establish the cost base or capital proceeds needed to calculate your capital gain or loss.

When Do You Need a CGT Valuation?

The ATO requires a market valuation in several circumstances. Using the wrong figure, or no valuation at all, can result in incorrect tax reporting and potential penalties.

Selling an Investment Property

When you sell an investment property, you need to calculate the capital gain. If you purchased the property on the open market and have clear records, the purchase price forms your cost base. But if records are incomplete, the property was gifted, or you need to account for improvements, a professional valuation may be required. For residential investment properties, an accurate valuation makes sure you pay the correct amount of CGT.

Converting Your Home to a Rental

This is one of the most common situations we see. If you convert your main residence into a rental property, you must obtain a market valuation at the time of conversion. This is known as the "home first used to produce income" rule and applies to properties acquired on or after 20 September 1985 where the first rental occurred after 20 August 1996. The market value at conversion becomes your cost base for CGT purposes. Missing this valuation can be costly when you eventually sell.

Transferring Property to Family or Related Parties

When property is transferred between related parties, the ATO applies the market value substitution rule. Even if no money changes hands, or the sale is below market value, CGT is calculated on the property's true market value. This applies to gifts, transfers to adult children, and sales to family members at discounted prices. A lot of people don't realise this until it's too late.

Inheriting Property

If you inherit a property, your cost base depends on when the deceased acquired it and whether it was their main residence. For post-CGT assets (acquired after 20 September 1985), the beneficiary's cost base is typically the market value at the date of death. A valuation at this date is essential for calculating CGT when the property is eventually sold. Worth noting: if you sell an inherited main residence within two years, you may be exempt from CGT entirely.

Transferring Property to an SMSF or Trust

Transferring property into a self-managed super fund or family trust triggers a CGT event. The ATO requires the transfer to be conducted at market value, regardless of the actual price paid. An independent SMSF valuation keeps you compliant and provides a defensible cost base for future transactions.

What Is a Retrospective Valuation?

A retrospective valuation determines a property's market value at a specific date in the past. This is essential when you need to establish a cost base but didn't obtain a valuation at the time of acquisition, conversion, or inheritance.

Our valuers conduct retrospective valuations by analysing historical sales data from the relevant period, reviewing old photographs and aerial imagery, examining council records, and inspecting the property's current condition to understand what has changed. The goal is to determine what the property would have sold for on the open market at the retrospective date.

Retrospective valuations are commonly required when you converted your home to a rental years ago without getting a valuation, inherited a property and need the value at the date of death, have incomplete purchase records, or made significant renovations without documenting the property's value before and after. In our experience, most people don't think about this until they're ready to sell.

Understanding the CGT Discount

Australian residents who hold a property for at least 12 months before selling are entitled to a 50% CGT discount. This means you only pay tax on half of your capital gain. Complying superannuation funds receive a 33.33% discount. Companies aren't eligible for any discount.

Assets acquired before 20 September 1985 are exempt from CGT entirely. However, any improvements made after this date may be subject to CGT as separate assets.

The discount applies after you offset any capital losses against your capital gains. An accurate valuation makes sure you calculate the correct gain and apply the discount appropriately.

The 6-Year Absence Rule

If you move out of your main residence and rent it out, you can continue to treat it as your main residence for CGT purposes for up to six years. This is known as the absence rule or the 6-year rule.

During this period, you won't pay CGT on any capital gain when you sell, provided you don't treat another property as your main residence at the same time. If you move back in, the six-year period resets. If you rent the property for longer than six years in a single absence, CGT applies to the period exceeding six years.

To use this rule effectively, you need to know the property's market value at key dates. Particularly when you first rented it out and when you sell.

What's Included in a CGT Valuation Report?

A CGT valuation report provides the ATO with the evidence needed to support your tax position. Our reports are prepared to meet ATO requirements and include:

Our reports are accepted by the ATO, accountants, and financial planners for CGT purposes.

How Much Does a CGT Valuation Cost?

CGT valuations for standard residential properties typically cost between $300 and $600. Commercial properties and complex holdings may attract higher fees depending on the analysis required.

Retrospective valuations often cost more than current valuations due to the additional historical research involved. The reality is, the cost of a professional valuation is minor compared to the potential CGT savings from an accurate assessment.

The fee for a CGT valuation is tax-deductible as a capital cost. It can be added to your cost base, reducing your taxable capital gain.

Why Choose a Certified Property Valuer for CGT?

The ATO does not accept bank valuations or real estate agent appraisals for CGT purposes. These are informal estimates prepared for different purposes and lack the methodology and independence required for tax compliance.

A Certified Practising Valuer with the Australian Property Institute provides an independent, evidence-based assessment that meets ATO standards. Our valuers have access to comprehensive sales databases, understand the methodology required for retrospective valuations, and prepare reports that withstand ATO scrutiny.

When you work with Alliance Australia Property, you get accurate valuations backed by professional credentials and local market expertise. No inflated figures. No guesswork. Just a defensible valuation you can rely on.

FAQs About Capital Gains Tax Valuations

What is a capital gains tax valuation?

A CGT valuation is a professional assessment of a property's market value used to calculate your capital gain or loss for tax purposes. It must be conducted by a qualified valuer and meet ATO requirements.

When do I need a CGT valuation vs using the purchase price?

You can use the purchase price if you bought on the open market with clear records. A valuation is required when property is gifted, transferred between related parties, inherited, converted from a home to rental, or when records are incomplete.

What is a retrospective property valuation?

A retrospective valuation determines a property's market value at a specific date in the past. It's used when you need a cost base but didn't obtain a valuation at the relevant time, such as when you first rented out your home.

Are CGT valuations tax deductible?

Yes. The cost of a CGT valuation can be added to your cost base as a capital expense, reducing your taxable capital gain when you sell.

Can I use a real estate agent's appraisal for CGT?

No. The ATO requires valuations from qualified professionals. Agent appraisals are informal estimates and won't be accepted for CGT purposes. We've seen people try this and get caught out.

What if I converted my home to a rental years ago without getting a valuation?

A retrospective valuation can be conducted to determine the property's market value at the date of conversion. Our valuers use historical sales data and other evidence to establish the value at that time. It's not ideal, but it can be done.

How does the 50% CGT discount work?

If you hold a property for at least 12 months before selling, you only pay tax on half of your capital gain. The discount is applied after offsetting any capital losses.

How do I arrange a CGT valuation with Alliance Australia Property?

Contact us for a quote. We'll arrange a property inspection, conduct the necessary research, and deliver your valuation report directly to you and your accountant.

Ready to arrange your CGT valuation?

Get a quote for your capital gains tax valuation today, or give us a call to speak with one of our certified valuers.