Tax and stamp duty valuations

Tax and stamp duty valuations

At Lotus Amity we provide tax and stamp duty valuations. We prepare valuations of businesses, shares, goodwill, and intangible assets.

The valuation reports we prepare are comprehensive and fully supported to meet the exacting Australian Tax Office requirements and to stand up if the matter goes before a tribunal or the Commissioner.

Types of tax and stamp duty valuations

 Examples of where we provide tax and stamp duty valuations include:

• The transfer of shares and or business assets between related parties
• Intellectual property and goodwill for stamp duty purposes
• The small business threshold test for capital gains tax concessions
• The issue of shares or options under an employee share scheme
• The issue of shares for scrip for scrip roll-over relief
• The cost base of goodwill in a consolidation

Valuation requirements for the Tax Office

The Australian Tax Office provides detailed valuation guidelines. The guidelines states that the Commissioner considers a business valuation report to be reliable if it follows the Australian and International Valuation Standards. At Lotus Amity we comply with both the Australian businesss valuation standards and the International Valuation Standards. 

The ATO further states that valuation reports must contain sufficient evidence and reasoning to allow for testing or replication. At Lotus Amity we provide comprehensive reports for the ATO with detailed supporting documentation, careful input analysis, consideration of all three valuation approaches, and reasoned and supported assumptions.

Our granular and detailed business valuation process avoids the four common valuation issues areas flagged by the ATO:

• Documentation: omitted, insufficient, incorrect, and or inconsistent documentation and evidence
• Analysis: lack of appropriate analysis, scrutiny of information and or verification of inputs
• Methodology: inappropriate choice and or application of methodology
• Assumptions: unreasonable, unsupported, incorrect, and or inconsistent assumptions

Further, at Lotus Amity we carry out research and model discount rates and cash flows and ensure that we avoid these other specific valuation issues raised by the ATO:

• Lack of support for size, risk and other adjustments to the chosen discount rate or capitalisation multiple
• Inappropriate use of averaging
• Reliance on post valuation date information and future events which cannot be reasonably foreseeable at the valuation date
• The valuation approach does not align with the relevant tax provision, case law or ATO view documents

Tax and Stamp Duty Valuation Experience

Previous valuation reports prepared by Lotus Amity for tax and stamp purposes include:

• Valuation of a hotel pub group, comprising of freehold and leasehold pubs and bottle stores. Valuation of the shares required for tax purposes in relations to a scrip for scrip transaction. Key valuation issues included the difference in the revenue sources between pubs (such as gaming income, bar and food income, accomodation, bottle store income and drive in income), proposed refurbishment and development expenditure and the impact on future revenue and margins, and the impact of special shares and management fees.

• The valuation of the equity in a group of veterinary clinics. Valuation report prepared to establish if shareholders were eligible for scrip for scrip roll-over relief under Subdivision 124-M of the Income Tax Assessment Act.
• The valuation of a business providing demolition services, excavation services and equipment hire. Valuation report prepared in relation to the small business threshold test for capital gains tax concessions.
• The valuation of a sporting footwear and apparel retailer. Valuation report prepared to determine the cost basis for the transfer of shares to the testamentary trust.
• The valuation of a technology company providing a marketplace for auto services including retail and fleet servicing. Valuation report prepared for tax purposes in relation to the buy-back and issue of shares under the employee share scheme.
• The valuation of a national science, engineering, and technology consulting services business. Valuation report prepared for tax purposes in relation to the transfer of the business between related companies in the group structure.
• The valuation of the goodwill and intellectual property in a fabrication and fitting group. Valuation report prepared in relation to the small business threshold test for capital gains tax concessions.
• The valuation of ordinary and preference shares in a national company operating childcare centres. Valuation report prepared for tax purposes in relation to the ordinary and preference shares to be issued to employees.
• Valuation of a group providing services through the home care packages program and disability care through the National Disability and Insurance Scheme. Valuation prepared for tax purposes in relation to the transfer of personally held shares to a related trust.