ATO warns on inflated property valuations ahead of 2027 CGT changes
Gains accrued to 30 June 2027 keep the 50 per cent discount, and the tax office says it will be watching how investors value their properties at that cut-off.
Image: Smart Property Investment
The Australian Taxation Office is lifting its scrutiny of property investors ahead of the capital gains tax discount reforms, with inflated valuations designed to sidestep the changes squarely in its sights.
The new settings will replace the 50 per cent CGT discount and impose a 30 per cent minimum tax rate on capital gains accruing from 1 July 2027.
Gains accrued up to 30 June 2027 will retain the 50 per cent CGT discount, while those accrued after that date will apply to applicable properties under the new settings.
That split creates an obvious incentive to push up the value attributed to a property at the cut-off date, and the regulator has made clear it is alert to it.
An ATO spokesperson said deliberately inflating a valuation to take advantage of the pre-existing discount to reduce tax was "not acceptable" and "may attract compliance scrutiny".
"Taxpayers are required to determine and support the market value of their assets in accordance with tax law," the ATO told Smart Property Investment.
What counts as a supportable valuation
Not all investors are required to have their property valued professionally. But the regulator said all taxpayers should ensure their valuations were supportable, replicable and based on appropriate evidence.
"Valuations undertaken by professional valuers are generally more credible than those provided by someone who isn't a professional valuer," it said.
The ATO said it would assess a valuation's validity based on the asset type, the methodology used, and the evidence supporting it.
For property, the regulator said only professionals licensed under the relevant state, territory or Commonwealth legislation can conduct a valuation.
More guidance to come
"We will provide additional guidance before 1 July 2027 on how taxpayers can comply with their market value obligations," the ATO said.
That guidance will tell taxpayers how to determine the market value of certain assets, which professionals can conduct a valuation, and what documentation must be kept as evidence.
"As with all significant tax changes, the ATO will monitor emerging risks and taxpayer behaviour and will take appropriate action where it identifies arrangements or positions that are not consistent with the law," it said.
