CGT 2027 Cost Base Valuations
CGT 2027 valuation requirements arise from proposed capital gains tax changes that require certain assets to be recorded at market value as at 1 July 2027.
These measures were announced as part of the Federal Budget and are progressing through the legislative process. While the rules are not yet enacted, they are expected to require taxpayers to use market value at that date as the starting point for future capital gains tax calculations.
As a result, taxpayers and advisers are already considering how to capture and support value at 1 July 2027. Accordingly, a CGT 2027 valuation provides the basis for determining future tax outcomes.
At Lotus Amity, we prepare Capital Gains Tax valuations that establish market value and support compliance with the tax framework.
Background to the CGT Changes
The proposed changes introduce a reset of cost base for certain assets, using market value as at 1 July 2027. In particular, the legislation requires taxpayers to calculate future capital gains or losses by reference to that value rather than historical cost. As a result, the adopted value at 1 July 2027 will directly influence future tax outcomes.
At the time of writing, these measures are progressing through Parliament and have not yet been enacted. Once enacted, the rules are expected to apply from the commencement date specified in the legislation, typically aligned with the start of an income year.
Despite this timing, the direction of policy is clear. Accordingly, advisers and taxpayers are preparing now to ensure that sufficient information is available to support a valuation as at 1 July 2027.
CGT 2027 Valuation Requirements
A CGT 2027 valuation establishes the relevant market value at 1 July 2027. From that point:
- market value becomes the new baseline
- future gains or losses are measured from that amount
- the adopted value directly affects tax outcomes
Accordingly, the valuation must reflect conditions that existed at the relevant date. Therefore, both accuracy and supportability remain critical.
Timing and Preparation for CGT 2027 Valuations
A CGT 2027 valuation determines value as at 1 July 2027; however, the valuation itself may be prepared at a later time. In practice, taxpayers often finalise valuations upon disposal of the asset or when reporting obligations arise. Even so, delays introduce practical risks that increase over time:
- access to relevant financial data may decline
- supporting documents may become incomplete
- assumptions may begin to reflect later events
Accordingly, a CGT 2027 valuation must rely only on information known, or reasonably available, at 1 July 2027. Importantly, the ATO does not accept hindsight when determining value. For this reason, early preparation is recommendedl. In particular, taxpayers should:
- retain financial statements, forecasts and supporting records
- document key business conditions at that time
- preserve evidence underpinning valuation assumptions
As a result, a well‑maintained information base improves both reliability and defensibility.
Why a Valuation is Required
Where the rules require a reset to market value, taxpayers must establish an objective and supportable amount. In these circumstances:
- the valuation determines the new cost base
- the adopted figure supports future calculations
- the ATO may review the position
Accordingly, a CGT 2027 valuation reduces the risk of dispute and promotes consistency.
Assets Commonly Affected
The requirement to establish market value applies across a range of asset types. Typically, this includes:
- shares in private companies
- interests in trusts
- operating businesses
- intangible assets, including goodwill
As a result, many private groups and family‑owned businesses may need to consider valuation issues.
Approach to CGT Valuations
We apply established valuation methodologies and tailor them to each asset and circumstance.
Income Approach
We apply discounted cash flow or capitalisation methods where forecasts can be supported. Accordingly, this approach reflects expected performance and risk.
Market Approach
We assess comparable companies and transactions. Consequently, this provides a market‑based reference point.
Cross‑Checks
Where appropriate, we apply multiple approaches. As a result, cross‑checks strengthen reliability and improve confidence in the outcome. We may also consider an cost‑based approach, particularly where the value of the underlying assets provides a more reliable indicator of market value. This may arise where the business is asset‑intensive or where earnings do not fully reflect underlying value.
ATO Expectations
The ATO expects valuations used for CGT purposes to be objective, evidence‑based and capable of independent review. In particular, a compliant valuation:
- reflects market value at the relevant date
- applies appropriate methodology
- relies on supportable data
Accordingly, unsupported estimates or retrospective assumptions increase the risk of challenge.
Common Issues in CGT Valuations
In practice, challenges arise when information is incomplete or assumptions lack support. Common issues include:
- missing financial data
- reliance on hindsight
- inconsistent methodologies
- limited documentation
As a result, the ATO may question the adopted value. Therefore, a structured approach remains essential.
How We Support CGT Valuations
We provide valuation services to support cost bases and ongoing compliance. Our work includes:
- determining market values
- preparing independent valuation reports
- assisting advisers in documenting assumptions
- supporting responses to ATO queries
Accordingly, our work ensures that CGT valuations remain robust and defensible.
Case Study – Market Valuation for Tax Cost Base Reset
A privately owned retail business required a valuation of its shares at a specific date following the death of the owner. The valuation established the market value for tax purposes, including the cost base on transfer to a testamentary trust. The business operated across multiple retail locations and online channels. Performance depended on inventory strategy, supplier relationships and consumer demand.
Valuation challenge
The valuation required a market value at a specific date, with no arm’s length transaction. The work needed to:
- establish a defensible market value at the date of death
- support tax compliance and cost base calculations
- reflect the business as it existed at that time
Several factors increased complexity:
- uncertainty around inventory levels and realisable value
- large swings in working capital
- variation in revenue and margins across recent periods
These issues meant the valuation required careful judgement based on information available at the valuation date.
Approach
We adopted an income-based approach as the primary method, with market cross-checks. First, we assessed financial performance, including revenue trends, margins and operating costs. Earnings were normalised to reflect a commercial structure. We then forecast cash flows based on:
- expected revenue growth
- sustainable margins
- capital and working capital requirements
We modelled multiple scenarios to reflect uncertainty in future performance. We also:
- applied a discount rate reflecting risks of a private retail business
- assessed surplus working capital, including excess inventory
- compared implied multiples with market data
This approach ensured the valuation reflected both operations and the balance sheet at the valuation date.
Outcome
The valuation produced a range of values, with a supported mid-point for tax purposes. This provided:
- a defensible market value at the date of death
- a clear cost base for the shares
- support aligned with accepted valuation standards
The use of transparent assumptions and scenario analysis reduced the risk of dispute and supported tax compliance.
Relationship to Other Valuation Requirements
CGT valuations interact with several broader valuation contexts. These include:
- tax and stamp duty valuations, where market value drives outcomes
- transaction valuations, where assets transfer between parties
- family dispute valuations, where value is assessed at specific dates
Accordingly, valuation must remain consistent across these areas.
Frequently Asked Questions
Do I need a CGT 2027 valuation?
A valuation is required where the rules require market value to establish a new cost base
Can the valuation be prepared after 1 July 2027?
Yes; however, the valuation must reflect information available at that date and the valuer must not use the benefit of hindsight
What is the main challenge?
Ensuring sufficient contemporaneous information exists to support the valuation is the main challenge
What happens if the valuation is not supportable
The ATO may challenge the adopted value, which may result in adjustments
Important Information
Lotus Amity provides independent valuation services only. We are Chartered Accountants; however, we do not provide tax advice, legal advice or financial product advice. We do not hold an Australian Financial Services Licence (AFSL).
Accordingly, this material is general in nature and should not be relied upon as advice. You should obtain specific tax and legal advice before making decisions.