ATO Apportionment vs. Market Valuation
Broadly, a taxpayer's position may rely on one of two approaches: a formula or apportionment-based calculation, or an independently established market value at a specific date. The two can produce meaningfully different results — and the gap is rarely just academic.
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ATO Apportionment vs. Market Valuation
Broadly, a taxpayer's position may rely on one of two approaches: a formula or apportionment-based calculation, or an independently established market value at a specific date. The two can produce meaningfully different results — and the gap is rarely just academic.
Download PDF — ATO Apportionment vs. Market Valuation (opens in a new tab)The apportionment approach
- •Uses a formula or apportionment-based approach, where applicable
- •May allocate gains according to the applicable taxation methodology
- •Does not necessarily replicate actual property market movements
- •Relies on the applicable statutory or tax calculation
The independent valuation approach
- •Establishes market value at a specific, relevant date
- •Considers the actual property and market conditions at that date
- •Analyses relevant comparable market evidence
- •Prepared using recognised valuation methodology
A worked example of why they diverge
Illustrative example only — figures are indicative and don't reflect any actual property. Say a property was purchased for $800,000, and is eventually sold for $1,500,000. A straight-line apportionment simply divides the total gain evenly across the ownership period. But if the property's growth wasn't even — say it was worth $1,300,000 at the relevant valuation date, having grown quickly early and then plateaued — an independent valuation at that date tells a very different story than the straight-line figure does. Whichever approach is used, the gap between them can be a meaningful share of the total gain.
What goes into a cost base
Whichever approach applies, it helps to understand what actually makes up a property's cost base. Generally, five elements are recognised:
- •Money paid to acquire the property (the purchase price)
- •Incidental costs of acquiring or disposing of it — for example, stamp duty, legal fees, and agent's commission
- •Certain costs of owning the property — for example, interest, rates, land tax, insurance and repairs, generally relevant only where the property produced income and hasn't already been claimed as a deduction
- •Capital costs to increase or preserve the property's value — for example, capital improvements and renovations
- •Capital costs incurred to establish, preserve or defend title to the property, or a right over it
Why they can produce different outcomes
Property values rarely move in a straight line. A property that grew slowly for years and then jumped sharply — or the reverse — will show a very different value under a straight-line apportionment compared to its actual value at a given point in time. Where the relevant date sits matters enormously to the outcome.
Which one applies to you?
This depends on your specific circumstances, the nature of the CGT event, and current legislation. Your accountant or tax adviser can confirm which approach is relevant, and whether an independent valuation would support your position.
Guide disclaimer: Which approach applies to your circumstances, and the calculations involved, should be confirmed with a qualified tax or legal adviser.
FAQs
It depends entirely on how the property's value actually moved over the ownership period, so neither method is automatically better or worse. A property with strong early growth that plateaued later may show a smaller gain under an actual valuation than under a straight-line apportionment, while the reverse can just as easily be true.
