How the ATO reviews business valuations.
What happens when a tax-purpose valuation is reviewed by the ATO, and how a well-prepared valuation report holds up.
When the ATO reviews a tax-purpose business valuation, it assesses whether the methodology is appropriate for the asset and purpose, whether the evidence is documented, whether the assumptions are reasonable, and whether the conclusion is supportable. Review typically occurs in the context of a broader audit, a small business CGT concession claim, a restructure rollover claim, or a related-party transaction. A defensible valuation report — with documented methodology, evidence and reasoning — typically holds up under review.
When ATO review happens
The ATO does not review every tax-purpose valuation. Review is triggered by audit activity, by specific concession claims (notably small business CGT concessions, where eligibility tests depend on market values), by restructure rollover claims, by related-party transactions where the position appears favourable to the taxpayer, and by general taxpayer risk profile. Where review occurs, it is usually conducted by ATO valuation specialists.
What ATO reviewers look for
The ATO's market valuation guidance sets out the framework. In practice, reviewers assess: was the methodology appropriate for the asset, evidence and purpose; was the methodology selection reasoned; were rejected methodologies discussed; was the evidence documented and reliable; were the assumptions clearly stated and reasonable; were the limitations disclosed; was the conclusion within the supportable range that the evidence allows; was the report prepared by an independent and appropriately-qualified valuer.
What a defensible valuation looks like under review
A defensible report has the methodology selection reasoned in writing, multiple methodologies tested with results documented, evidence references cited for each input, assumptions stated and bounded by limitations, the Valuation Position Analysis section explaining why the concluded position is the most supportable, independence statement signed by a named senior reviewer, and a complete working file retained. Where these elements are present, the report typically holds up. Where any of these elements is missing or weak, the review can question the conclusion.
What happens when a valuation is challenged
A challenged valuation is not the end of the matter. The ATO will typically issue questions about the methodology or evidence. The valuer (or the taxpayer's adviser) responds with reference to the working file. Where the response is supportable, the valuation stands. Where the response cannot defend the conclusion, the ATO may propose an alternative valuation. The taxpayer can accept, negotiate, or contest the matter through objection and litigation processes. A well-prepared file makes the response defensible.
Common questions.
Will the ATO definitely accept a Prismi report?+
No valuation provider can guarantee acceptance — the ATO does not pre-approve valuations. What we provide is a report prepared to the standard the ATO reviews against: methodology reasoned, evidence documented, assumptions stated, conclusion supportable. Where review occurs, our reports are designed to hold up.
How long does an ATO valuation review take?+
Variable — typically months, sometimes longer if the matter escalates. We retain working papers for ten years so the file is available to support response if requested.