Quick answer
You usually need a valuation for capital gains tax when the law asks for market value rather than the price paid. Common cases are inherited or gifted property, a home that becomes a rental, property held across 1 July 2027, and missing past records. A normal sale between unrelated parties uses the sale price.
Selling a property and wondering whether you need a valuation for capital gains tax purposes? Often the answer is no. The question is whether the tax rules use the price you actually paid or received, or the market value on a particular day. When they use market value, a CGT valuation from an independent valuer gives you and your accountant a number you can support.
Below are the situations where a property valuation for capital gains tax is most often needed, from a house valuation for capital gains tax on a former home to a rental or inherited property. Our property valuers prepare the valuation. Your accountant decides what your return needs.
In this guide
Quick guide: when do you need a valuation for capital gains tax?
Use this as a starting point, then confirm with your accountant.
| Situation | Is a valuation usually needed? | Why |
|---|---|---|
| Selling an investment property to an unrelated buyer | Usually not for the sale itself | The sale price is generally used |
| A home that becomes a rental | Often | Its market value when first used to produce income can be relevant to the starting value for your gain (the cost base) |
| Inherited property | Often | The value at the date of death can set the cost base |
| A gift, or a sale to a relative below market value | Often | Market value may replace the price actually paid |
| Property held across 1 July 2027 | Yes, or an estimate (apportionment method) | The value on that day separates old gains from new |
| SMSF transfers or reporting | Usually | Super funds generally deal with property at market value |
| Records missing from a past date | A retrospective valuation | It estimates market value at that date |
Selling an investment property
If you sell to an unrelated buyer on normal commercial terms (at arm's length), the sale price is generally what you are treated as receiving (the capital proceeds), so a valuation is usually not needed for the sale itself. A valuation can still matter for the starting point, for example where the property was inherited, gifted or changed use, or where the switch-over rules at 1 July 2027 apply.
A home that becomes a rental
When a property that was your main residence is first used to produce income, its market value at that time can be relevant to the cost base, depending on when you acquired it. If you did not get a valuation then, a retrospective valuation can estimate the value at that date.
Rented out your old home?
If you did not get a valuation when it started producing income, a retrospective valuation may fill the gap. Ask us what is possible.
Inherited or gifted property
Where property is inherited, the market value at the date of death can set the cost base, depending on when the deceased acquired it. Where property is gifted or sold to a related party at a price that is not market value, market value may be used in place of the price.
Property held across 1 July 2027
For property held across the change on 1 July 2027, the market value on that day is the dividing line between the old and the new treatment, unless an apportionment method (an estimate based on time or growth) is used instead.
SMSF and family law situations
Self managed super funds transferring or reporting property at market value commonly need an independent SMSF property valuation. In a separation, a valuation is commonly needed to settle the property division, and the figures can matter later when the property is sold. Your accountant can explain whether CGT rollover relief (which can defer the tax) applies.
Mistakes to avoid
Common mistakes:
- Using an agent's appraisal as your evidence. It is usually a price opinion, not a formal valuation with the evidence set out.
- Valuing the wrong date. The report has to be as at the date your accountant needs.
- Getting a valuation without stating the purpose. A CGT valuation should say what it is for.
- Waiting until after the sale. The evidence for an earlier date is easier to build sooner.
Key terms explained
- Arm's length
- A deal between unrelated parties who each act independently, so the price is a genuine market price.
- Capital proceeds
- What you receive when you sell. In a normal arm's-length sale this is the sale price.
- Cost base
- Broadly, what you paid for the property plus certain costs of buying, owning and improving it.
- Market value substitution
- A rule that uses market value in place of the price actually paid, for example when property is gifted or sold to a relative below market value.
- Retrospective valuation
- A valuation of market value as at a date in the past, prepared from the evidence available for that date.
Need a CGT valuation? Talk to a valuer.
Tell us the property, the date you need the value for and what it is for. We will tell you what is needed and what it involves.
Free first call. Fee confirmed before work starts. Certified Practising Valuer. Australia-wide.
Sources and further reading
- Australian Taxation Office: Capital gains tax
- Australian Property Institute: The CGT changes and property valuations
This is general information, not tax advice. Speak to your accountant or tax adviser about your own position. A valuation sets out market value at a stated date. It does not work out your tax.