Tag 4 of 6 · Tax
Valuations for tax at home
The ATO says you must obtain a market valuation of an asset when tax law requires one, and that the valuation must be objective and supportable. For a household, the plainest case on its pages is the home: if you first start renting out your home, or running a business from it, after 20 August 1996, you must get a market valuation of it at that time.
General information, not tax advice. Tax rules depend on circumstances. The ATO’s market valuation of assets page and its main residence pages are the place to check. The ATO itself suggests seeking professional advice where its information does not fully cover your circumstances.
What the ATO means by market value
The ATO describes market value as the estimated worth, in money, of an asset on the open market at a given time. It rests on the most valuable use of the asset, which may differ from how it is used now, and on what a willing buyer and seller would agree in an arm’s length transaction. It adds that the definition may vary for particular provisions of tax law and types of asset.
The home that starts earning
A home you live in is generally exempt from capital gains tax (CGT) if you are an Australian resident. Rent out part of it or run a business from it and you lose the full exemption, though a partial exemption may apply. When that happens, the ATO says you are generally taken to have acquired the home at the time you first used it to produce income, and you work out the gain or loss on a later sale from its market value at that time. It calls this the “home first used to produce income rule”.
- 1 The home is acquired.
- 2 It is lived in as the main residence.
- 3 It is first rented out, or used for a business: the market valuation is taken now.
- 4 It is sold, and the gain is worked out from tag 3.
When the rule applies
Apart from its exclusions, the ATO says the rule applies when every one of these holds:
- The owner acquired the property on or after 20 September 1985.
- The owner first used it to produce assessable income after 20 August 1996.
- A sale would bring only a partial exemption, because the property was used to produce income during ownership.
- A full exemption would have applied had the sale happened just before the property was first used to produce income.
It does not apply, among other exclusions the ATO lists, if you used the home to produce income from the time you acquired it, if you inherited a dwelling that was the deceased’s main residence and sell it within 2 years, or if you choose to keep treating a property as your main residence after moving out and it stays fully exempt.
Two consequences follow from the date. If you sell within 12 months of first using the home to produce income, you can’t use the CGT discount. And the gain is shared out by the floor area set aside to earn income and the number of days it was used that way; the ATO’s CGT property exemption tool works out the share.
The same ATO list also names transferring property or shares between related parties, such as family members.
A gift of property the ATO values itself
When someone gives property to a deductible gift recipient (DGR), the valuer can be the ATO. If you give property that the ATO values at more than $5,000 (as at October 2026), you may be able to claim a tax deduction for the amount on its Valuation certificate, whether you bought the property more than 12 months earlier or did not buy it at all, for example because you won or inherited it. Property bought within the 12 months before the gift may still be deductible whatever it is worth.
- Lodge two forms togetherThe philanthropy program’s Request for valuation, and its Certificate of donation, on which the DGR acknowledges receiving the property.
- Pay the application feeIt is not refundable, and is credited against the total fee for the valuation.
- Receive the estimated chargeThe ATO advises in writing of the estimated charge; the fee is the actual cost of the valuation.
- Receive the Valuation certificateThe ATO issues it once the valuation is complete.
The cost of getting the valuation can itself be deducted, if the valuation was made only to work out the market value of a deductible gift, in the income year the expense is incurred. Cultural items given to public galleries, museums and libraries follow a separate path with their own valuers, set out in Valuing a cultural gift.
Getting it right, and keeping it
The ATO says a valuation must be objective and supported with appropriate evidence, and that valuations by professional valuers are more credible than those by someone who is not one. Keep the report: if the ATO later reviews your tax affairs, you will need it to support the valuation.